- Month-on-month inflation rate surged to 37.2%, marking the first time
- The ZiG currency lost 43% of its value against the US dollar in late September, driving consumer prices up
- IMF downgraded Zimbabwe's DGP to 2%, citing persistent inflationary pressures, institutional instability
Harare- Zimbabwe’s month-on-month inflation has entered the double digit for the first time in ZiG’s history since its introduction in April 2024 according to the latest data released by the nation’s statistics agency, Zimstat.
Consumer prices surged by an alarming 37.2% month-on-month in October following the dramatic devaluation of the Zimbabwe Gold (ZiG) currency, which lost 43% of its value against the U.S. dollar in late September.
Launched in April to combat a long-standing legacy of hyperinflation—an issue persisting for the last 15 years—Zimbabwe is now facing inflation rates that far exceed those of its southern African neighbors.
In stark contrast to regional performance, Mozambique has managed to maintain inflation at approximately 8.8% by implementing stringent controls on government borrowing and adjusting interest rates through the Bank of Mozambique.
These measures have allowed the country to project a GDP growth of 5% for 2024 while Botswana, with an inflation rate around 4.2%, benefits from a managed currency peg to the South African rand and a basket of international currencies, which promotes exchange rate stability and supports investor confidence.
The International Monetary Fund (IMF) downgraded its 2024 growth forecast for Zimbabwe to just 2%, citing persistent inflationary pressures and institutional instability. While a rebound to 6.1% growth is anticipated in 2025, the high inflation remains a critical risk, exacerbated by weakened institutional capacity and inconsistent monetary policy.
The government's inflationary tactics, such as compensating former farmers with treasury bills, have led to an increased money supply, further aggravating inflation.
In contrast to Botswana's predictable currency management, Zimbabwe's recent devaluation reflects its vulnerability to market shocks, adversely affecting households and businesses alike.
South Africa's Reserve Bank (SARB) has taken a cautious approach to inflation control, maintaining a rate of 5.4% through interest rate adjustments and inflation targeting. The SARB’s clear communication strategy allows the market to anticipate policy decisions, helping stabilize inflationary expectations.
Zimbabwe, however, lacks a reliable monetary policy framework, often resulting in erratic market responses. Establishing a similar inflation-targeting policy could empower Zimbabwe's central bank to better manage inflation expectations.
Zambia offers another example of effective economic management, with a current inflation rate of 10% and an expected growth rate of 3.6% for 2024. Zambia’s focus on structural reforms and economic diversification beyond copper mining has made its economy less susceptible to global price shocks.
Zimbabwe could benefit from a similar strategy by fostering sectors such as manufacturing and technology, creating a more resilient economic base.
Curtailing government expenditure and minimizing reliance on treasury bills would help prevent excess money supply growth, a key driver of inflation while adopting a cap on public borrowing, akin to Mozambique’s approach, could enhance currency stability by reducing the risk of further devaluation.
Also, establishing an independent monetary policy committee—similar to those in Botswana and South Africa—could promote transparent, consistent, and data-driven inflation control measures.
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