The Zimbabwe National Statistics Agency (Zimstat) have put the year on year inflation rate for December 2018 at 42.09% up from 31.01% in November 2018. It is the highest inflation rate since 2009. In fact, from 2009 until 2018, inflation has been averaging 1.95%. However, some economists argue that this figure is misleading as actual inflation is five times higher than what Zimstat would want us to believe. Whichever figures you subscribe to, the point is that inflation is rising and solutions are needed, fast.
What it means
For the ordinary man and woman on the streets, this year on year inflation rate means that prices as measured by the all item Consumer Price Index (CPI) increased by an average of 42.09 percentage points between December 2017 and December 2018. In short, prices of basic goods are continuing to rise. Constrained production aided by foreign currency shortages can be attributed to this upward trend in the country’s inflation. Also, scarcity of basic commodities has led to price hikes as supply is failing to meet demand. Those with the scarce commodities tend to sell them for an arm and a leg. For business, high inflation means higher production costs. The consequences are adverse. Employees will demand more salaries, they already are anyway. Government is locked in a series of negotiations with its employees over salaries at the moment. The civil servants feel that their earnings have been eroded by inflation.
Africa’s inflation rates
To get a clearer sense of where we are going as a nation, let us look at the inflation rates in other African countries. At 42.09% for December 2018, Zimbabwe’s inflation is the second highest in the whole of Africa. Sudan has the highest with 72.94%. As for our neighbours, South Africa is at 4.5%, Zambia is at 7.9% and Malawi is at 9.9% as at December 2018. It is indeed a gloomy picture. Zimbabwe needs to work itself out of this situation considering the vast mineral resources and agricultural prowess that we have. Zimbabwe used to be the bread basket for Africa years ago. Now, we are nowhere near that billing.
To make matters worse, some voices even believe that Zimbabwe’s inflation rates as determined by Zimstat are wrong. United States economist and currency expert Professor Steve Hanke says that Zimbabwe’s inflation right now is much higher than 42.09%. He puts the inflation rate at 235% as at 23rd January 2019. It must be borne in mind that this figure takes into account the recent fuel price adjustments. The Zimstat figures were arrived at before fuels prices were increased. As to what the methodology used by Professor Hanke is, we leave that for another day. All the same, the gap between Zimstat and Professor Hanke’s figures is too wide. Some kind of harmonisation is required. For now, suffice to say, the graph shows an upward trend which started shooting further up in October 2018. That is a cause for great concern.
In a country where government is desperate to lure investors, rising inflation is not a good sign. Investors always consider these figures when making decisions on where to take their money. Our environment is not conducive yet. Something needs to be done.