Inflation unabated, nears the psychological 1000% as Zim dollar plummets

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  • Month on month inflation rate in April was 17.64%
  • CPI as at April 2020 stood at 953.36
  • Driving the inflation rate is a tumbling exchange rate

Zimbabwe’s galloping inflation edged closer to the psychological 1000% mark on hitting 765.6% in April, the latest data released by ZIMSTAT reveals. Zimbabwe is presently engulfed with hyperinflation barely 11 years after emerging from a similar record-breaking economic quagmire.

The month on month inflation rate in April was 17.64% flaking 8.95 percentage points on the March 2020 rate of 26.59%. The CPI as at April 2020 stood at 953.36 compared to 810.40 in March 2020 and 110.14 in April 2019.

Driving the inflation rate is a tumbling exchange rate that has seen the local currency shed more than 90% of its value on the formal market. The formal market remains very much bridled by the relevant authorities at 1:25 to the greenback. This is in contradiction to the 1:70 exchange rate now prevailing on the parallel market.

The Old Mutual Implied Rate, which is normally an indicator of the movement in the local currency is showing an exchange rate of 1:122 to the American dollar, raising a red flag on Zimbabwe’s currency woes.

The government through Treasury earlier projected a dip in monthly inflation to a single digit by the end of March 2020, a dream which has proved very much elusive as wheels come off the Zimbabwean economy.

Although the monetary authorities expect inflation to fall, the pressure emanating from exchange rate loss is too high and therefore increases outlook uncertainty. In fact, it raises risk on the potential of negative inflation going forward.

Equity Axis had projected annual inflation to reach 841.1% by April 2020 and close the year at 364%. Internal estimates place May inflation at circa 900%.

Also fueling the gloomy inflation outlook is the heavy blow suffered by the COVID19 pandemic to the already fragile economy which has failed to access adequate credit lines due to unserviced international obligations.

This is compounded by the projected drought, government stimulus spending, increased money supply following the government’s decision to inject more notes in the economy, rising foreign debt, continued electricity shortages, and currency depreciation.

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