• ZimStat now uses blended inflation models to track inflation in the domestic market, which some captains of industry have raised concerns that it distort the real trend of Zimbabwe dollar price inflation
  • RBZ revealed that about 76% of transactions in the local economy are now being conducted in US-Dollar currency
  • CZI advocates for the use of the Total Consumption Line (TCL) for Zimbabwe, which is measured in local currency dollars, to accurately estimate the actual Zimbabwe dollar inflation rate

Harare-Zimbabwe, a country once hailed as the breadbasket of Southern Africa, with its bountiful natural resources and highly educated labour force, has for the past two decades seen growing economic challenges that have resulted in a currency crisis and hyperinflation. With rampant inflation, the Reserve Bank of Zimbabwe (RBZ) has resorted to using blended inflation models to track inflation in the domestic market.

The blended inflation model, which is a measure of inflation that takes into account both US dollar and Zimbabwe dollar prices, is used to monitor the dynamics and the situation in the economy, where the bulk of transactions are executed in US dollars.

While the central bank has argued that the blended inflation model more accurately reflects inflation trends in the economy, some captains of industry have raised concerns that the model distorts the real trend of Zimbabwe dollar price inflation. The high rate of inflation, which has eroded the Zimbabwe dollar's value, has encouraged businesses and individuals to conduct transactions using hard currency, while only a small portion of the population still uses the Zimbabwe dollar.

In a recent poll, studies revealed that about 76% of transactions in the local economy are now being conducted in hard currency. Given that the bulk of transactions are now in US dollars, it is important for the industry to monitor supply and demand trends closely. Additionally, publishing inflation rates separately for the US dollar and the Zimbabwean dollar can enable easier planning for expenditures in both currencies.

The Confederation of Zimbabwe Industries (CZI) is advocating for the use of the Total Consumption Line (TCL) for Zimbabwe, which is measured in local currency dollars, to accurately estimate Zimbabwe dollar inflation. CZI argues that using blended inflation to compute an average of price dynamics in both US and Zimbabwe dollar currencies results in distorted pictures as it does not represent the situation for a particular individual, institution, or entity.

The industrial lobby group has noted that businesses are eagerly looking for estimates of actual inflation rates for the currency in use, which they have been currently denied by the authorities. According to CZI, the TCL inflation level for March 2023 was 206.7%, indicating that Zimbabwe could have had an actual inflation rate of anywhere between 185% and 189%.

Managing inflation continues to be a significant battle for the authorities in Zimbabwe. Despite interventions to control inflation, it remains volatile due to currency depreciation. The country needs to stabilize its economic and political environment to attract more investment and drive economic growth, particularly in the gold industry, which is a critical foreign exchange earner.

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