Zim’s monthly inflation shoots past Central Bank target

  • Monthly inflation closed at 3.9%
  • Increase due to exchange rate depreciation, SI127, pickup in demand
  • Annual inflation now stands at 106.6%

Harare – The month-on-month inflation rate scaled up by 1.4 percentage points in the month of June from 2.5% to 3.9% percentage points, rising by 0.9 percentage points above the government target of 3%.

Monthly inflation moved upwards for the first time this year in May and it seems the trajectory is now becoming a trend driven by exchange rates especially on the parallel market.

In the month, the official exchange rate declined by 1% in the month of June while it saw a 4% decrease on the parallel market.

On top of this, the introduction of Statutory Instrument 127, which was promulgated to govern and punish the use and abuse of foreign currency in the country also saw the inflation of prices of goods and services in both Zimbabwean dollar and U.S dollar terms.

Meanwhile, a sharp growth in overall demand for goods and services emanating from the opening up of the economy while supply is struggling to keep up also led to the uptick in the inflation rate.

Zimbabwe’s annual inflation slowed to 106.6% in June after shedding 55.31 percentage points off the May rate which came in at 161.91%.

The slash in annual inflation is a result of the base effect, the comparative period is relatively a very high base as inflation was at peak levels (737.3% in June last year) and consequentially when compared to the current period there is bound to be a somewhat misleading decline, making annual inflation in this instance a less accurate reflection of economic dynamics in the country.

The government expects that annual inflation will be around 55% in July, less than 10% by the end of the year.

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