Zimbabwe’s annual inflation ended the year at 42,09%, a gain of 11,08 percentage points from the November rate of 31,01% putting further pressure on Finance Minister Mthuli Ncube’s austerity budget. According to Zimstat, the CPI for the month ending December 2018 stood at 141,36 compared to 129,65 in November 2018 and 99,49 in December 2017.
The growing inflation rate, the third one with double digit growth, raises a red flag about the genuineness of government reform efforts. Government had anticipated inflation growth of 5 percentage points for the remaining two months of the year, yet in the month of November alone, it surged by 10 percentage points.
We are already midway through January and there has been not been anything or an important change in the economy to suggest that the inflation rate will drop. Prices will remain very high but perhaps more importantly, they will continue to increase following the changes in fuel pricing.
Prior to the introduction of bond notes, the inflation rate had remained below 5% for more than 7 years. That the Zim inflation closes 2018 at 42% undercutting Mthuli’s austerity budget economy began to see a substantial inflation growth after the bond notes really points to a disparity between local currencies and the greenback. The parallel market exchange rate has however remained stable since November but there are concerns that most good would now fully factor in the premiums following Government’s move to factor the rate when pricing fuel.
Ncube’s budget will be further constrained considering the salary increases, which are now going to be beyond the anticipated figures.
The upsurge in annual inflation rate for December was driven by food inflation, which carries a 31,98% weight of the total CPI basket. The year on year food and non-alcoholic beverages inflation rate stood at 52,68% in December 2018, gaining 11 percentage points on the November 2018 rate of 42,7%. However, the month on month food and non alcoholic beverages inflation rate stood at 9,07% in December 2018, shedding 5.46 percentage points from the November 2018 rate of 14,53%. Some of the food items whose inflation increased include oils and fats (69,68%), bread and cereal (45,66%) and meat (67,69%). Other significant increases were vegetables (49,97%), fruits (64,98%) and milk, cheese and eggs (46,75%).
Further pushing the annual inflation rate upwards, is the inflation in the transport services, which accounts for 9,8% of the total CPI basket, which rose to 56,47% for December 2018 from 22% recorded in November 2018. Spares and accessories were up at 84,32% while fuel and lubricants surged by 13,23%. On health, pharmaceutical products prices rose by 62,29%. For clothing and foot wear, clothing material prices went up by 81,48%. For non-alcoholic beverages, mineral waters and soft drinks picked up by 57,74% in December whilst alcoholic beverages were up to 30,21%.
The month on month inflation rate in December 2018 was 9,03% shedding 0,17 percentage points on the November 2018 rate of 9,20%.The month on month non-food inflation rate stood at 9,01 percent, gaining 2,51 percentage points on the November 2018 rate of 6,50 percent.
The rising inflation and anticipated price increases has seen the country go on all-out strikes and could further fuel wage inflation as workers demand inflation-busting salary hikes. This is amid fears that the country might not be able to cope with higher wage inflation given its low productivity
