Zimbabwe's inflation doubles up to 175%
Country stares hyperinflation in the face again
Zimbabwe’s inflation, the second highest in the world after Venezuela, has almost doubled in June, courtesy of high fuel and power prices.
According to figures from the government statistics agency, inflation for June went up to 175,66% from 97,85% in May.
Inflation has proved a thorny problem for Zimbabwe, facing its worst economic crisis since 2009.
In addition to high inflation, Zimbabwe is experiencing 16-hour power cuts a day as well as shortages of foreign currency, medicines and basic foods.
At the weekend the price of fuel went up by almost 20%, creating more inflationary pressure in the economy.
According to latest figures from the Zimbabwe National Statistics Agency (ZIMSTAT), the surge in inflation was largely driven by food inflation which jumped to 251.10 points from 126.30 points the previous month.
ZIMSTAT said transport inflation went up from 106.60 to 123.80 points while on a month-on-month basis, the consumer price index rose 39.26% in June compared to 12.54% in May.
There are fears the country will slide into hyperinflation.
Speaking to Business Day in Harare, economist Eddie Cross said government policies had contributed to the spiralling inflation.
“The chances of falling into hyperinflation are real now. The real reason why there has been such inflation is that the interbank market (for trading of foreign currency) has not been working to the maximum. Authorities need to put more policies and build more confidence to get the banks and other players to start trading on the market,” he said.
Last month the country announced the surprise move of adopting use of a local interim currency, ditching the rand and US dollar-dominated multi-currency system that had been in place since 2009.
The introduction of the interim local currency is yet to pay off, as the unit has continued to fall against the US and currently trades at 1:10 with the greenback.
Zimbabwe has been facing a currency quagmire in the past three years after it introduced a surrogate local currency dubbed bond notes in 2016 initially pegged at 1:1 with the US dollar.
After failing to sustain the 1:1 peg with the US dollar, several experiments on the currency have failed to yield positive results leading to high inflation and eroding of workers’ incomes.
Government workers currently earn basic salaries that are the equivalent of US$50 a month, owing to the country’s currency crisis.