- Year on year inflation rose to 256.9% in July
- Consumer Price Index grew to 10 932.83
- Month on month inflation slowed by 5.1%
Harare- Zimbabwe’s year on year-on-year inflation for the month of July registered a 34% increase to 256.9% from 191.6% recorded in June, widening the gape between the Interest Rates (IR) and inflation, the latest data released by Zimbabwe National Statistics Agency (ZIMSTAT) has revealed.
This is the highest inflation since February 2021 when year-on-year inflation was 321.6% while the total consumption poverty line for a person rose to ZW$23 479.
In June, the government hiked interest rates to a global record high of 200% as it battled to narrow the gap between IR and inflation, a scenario which had encouraged speculative borrowing, especially from the private sector.However, July inflation came ahead of the IR with a margin of circa 60%.
However, month-on-month inflation slowed by 5.1% to 25.6% in July from 30.7% in June 2022.
Inflation continues to spike in Zimbabwe, a major concern that the mid-term budget announced by Professor Mthuli Ncube was silent on.
Rather, the government announced an increase in the 2022 budget from the initial ZW$968.3 billion to ZW$ 1.9 trillion, pumping more rejected Zimbabwe dollars into the market.
The government's thirst to print more money and fund it's projects has led to growth in broad money, putting intense pressure on the ailing local currency as the public resorted to the black market to buy the much preferred US dollar.
Latest stats from the government shows that broad money registered a growth of 245% in May 2022, largely driven by poor management of the exchange rate which accounted for over 50% of the increase.
Due to poor policy management, the Central Bank revised its yearly inflation targets upwards to 160% by the end of the year from initial estimates of between 25% and 35%.
As another hedge against inflation, the government introduced gold coins which debuted in the market on the 25th of July.
However, the buying of gold coins in local currency reduces the whole thing to a scam.
Buying gold coins at an overvalued interbank rate will create arbitrage opportunities as people will go and buy the RTGS at the parallel market where the price is high and then go and buy the gold coins at banks with the interbank which is nearly half of that at the black market were major economic activities take place thereby putting more pressure on the local currency.
Against this background, compounded with the impacts of the global economic shocks due to the Russia-Ukraine war and governance confidence crisis, the latest yearly inflation projections are also likely to be grossly missed.
To deal with inflation, the government needs to look into issues around fiscal discipline, abolishing quasi-fiscal activities by RBZ, issues around addressing leakages coming from corruption and illicit financial flows.
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