The latest inflation statistics, courtesy of ZimStat have revealed an increase in year-on-year inflation to 785.55%. This is up 20 points from April’s 765.57%. On a month on month basis ZimStat reported 15.13% which bizarrely represents a second consecutive month of decline. This is divorced from price developments on the ground which have shown no abatement in Zimbabwean dollar terms.
Professor Steve Hanke contends that Zimbabwean inflation based on the Purchasing Power Parity method is at 924% year on year. ZimStat uses the Consumer Price Index method which uses a fixed basket of goods to measure changes in price while the PPP method looks at the purchasing power of the money compared to previous periods. Both methods have their merits. ZimStats figures tend to seem discordant with the experiences of Zimbabweans on the ground.
The currency has played its part in fuelling the inflation inferno. Many in the private sector have turned to the parallel market to access foreign due to a shortage of it in the formal system which has capped up of an unrealistic exchange rate with a fixed peg of 25 Zimbabwean dollars for a US dollar. The parallel market currently offers between 75 and 90 Zimbabwean dollars for the US dollar. This exchange rate shifts daily as inflation gather momentum. The graph shows a worry7ing divorce between the purported cause of inflation and the inflation rates. The change in currency is drawn from the middle of the month, ZimStat tends to collect inflation figures in the third week of the month so no divorce should be seen between the two.
Wages, unfortunately, have not followed suit and this has left Zimbabweans struggle to make ends meet. A coronavirus induced lockdown which continues but at a reduced level 2 now has decimated incomes particularly in the informal sector which is still barred from operating. Compounding the effects of inflation further.
Finance and Economic Development Minister Professor Mthuli Ncube had forecast reductions in inflation to low double digits and single digits by now but this has not materialised and is a dream best forgotten. The battle for Zimbabweans is how to survive in this situation that is all too familiar.