Inflation growth slows down but maintains upwards trajectory

Harare –Latest figures from Zimbabwe National Statistics Agency show that  Zimbabwe’s annual rate of inflation in February marginally rose to 59.4 percent from 56.9 percent in January which then was a 10 year high propelled by increases in the price of basic goods and beer.

The year on year Food and Non-Alcoholic beverages inflation prone to transitory shocks stood at 69.84 percent whilst the Non-food inflation rate was 54.35 percent.

CPI increased to 159.18 Index Points in February from 156.56 Index Points in January. CPI in Zimbabwe averaged 98.11 Index Points from 2008 until 2019, reaching an all-time high of 156.60 Index Points in January of 2019 from a record low of 87.40 Index Points in May of 2009.

On a month on month basis, prices increased by 1.67 percent in February, compared to 10.75 percent in January. This was effected by key driver bread and cereal items that came up 7.79%.

According to Equity Axis Research, “the 1.67% growth could be a reflection of the uncertainty that the market had in anticipation of the RBZ presenting the MPS which fell on the 20th of February which was after collation of data.”

“The growth rate may accelerate again after factoring in the changes that were implemented in the MPS, which relaxed the exchange rate to a start off rate of 2.5 times, and has since grown to 2.7 times,” said the analysts.

Prices have been going up as local bond notes and electronic money lose value against scarce US dollars.

Bread, a national staple, has gone up from around $1.40 per loaf to $2.50 in some shops, as bakers say they aren’t getting enough foreign currency to import flour.

The government through the latest 2019 Monetary Policy statement presented by central bank governor, Dr John Mangudya on 20 February has come up with monetary measures which they hope will help combat inflation, address foreign currency shortages and price distortions in the market.

Key measures presented by Mangudya include the subsequent liberalisation of foreign currency exchange through the introduction of the inter-bank foreign currency exchange market, demonetisation of RTGS balances, bond notes and bond coins into a virtual currency, RTGS dollar.

“The use of RTGS dollars for domestic transactions will eliminate the existence of the multi-pricing system and charging of goods and services in foreign currency within the domestic economy,” said Mangudya.

“In this regard, prices should remain at their current levels and or to start to decline in sympathy with the stability in the exchange rate given that the current monetary balances have not been changed.”

Appearing before the Parliament Committee on Public Accounts two weeks ago, Mangudya expressed optimism that the average rate of inflation will be lower come year to around 10-15 percent, as the Bank seeks to effectively effect value preservation through managing inflation.

In the pipeline, there is a high possibility that telecommunication firms will increase tariffs having already engaged the regulation authority to that effect, the energy authority is also mulling to increase electricity tariffs, and bakers recently announced an intend to increase the price of bread to retail price of RTGS$2.70 per loaf.

A combination of these factors among others will likely drive inflation further upwards contrary to government’s own projections.

-Equity Axis News

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Equity Axis is an online financial media service platform focused on African markets offering real-time stock quotes, news, analysis and data.

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