Zimbabwe’s year on year inflation rate has risen to 31.01% for the month of November 2018. This translates to a 10.16% increase on the October 2018 rate of 20.85%, according to Zimstat. For the layman on the street, this means that prices as measured by the all item Consumer Price Index (CPI) increased by an average of 31.01 percentage points between November 2017 and November 2018. The CPI for the month ending November 2018 stood at 129.65 compared to 98.97 in November 2017 and 118.73 in October 2018.
The year on year Food and Non-Alcoholic Beverages inflation prone to transitory shocks stood at 42.71% whilst the Non-Food inflation rate was 25.40%. Transitory shock in economics is shock whose effects gradually die out. It should be noted that food inflation carries a 31.98% weight on the total CPI basket.
Month on month inflation
According to Zimstat, the month on month inflation rate was 9.20%, a decrease of 7.24% on the October 2018 rate of 16.44%. What this means is that prices measured by the all item CPI increased by an average rate of 9.20% from October 2018 to November 2018. In addition, the month on month Food and Non-Alcoholic Beverages inflation rate stood at 14.53% in November 2018 shedding 5.59 percentage points on the October 2018 rate of 20.12%. The month on month on Non-Food inflation rate was at 6.50% shedding 8.1 percentage points on the October 2018 rate of 14.66%.
Causes of inflation
The shortage of foreign currency leading to speculative tendencies has been identified as one of the causes of inflation. Furthermore, the proliferation of the parallel (black) market also contributes to the rise in inflation rates. The value placed on local money (bond and RTGS) by the parallel market has continually declined. In the retail and other sectors, scarcity of basic commodities caused by declining supply has pushed prices up. Also, as unscrupulous business people take advantage of pricing distortions in the market, inflation shoots up the roof.
In the face of the above figures, government is putting on a brave face. Minister of Finance and Economic Development Professor Mthuli Ncube is still optimistic that measures announced under the Transitional Stabilisation Programme (TSP) will deal with inflationary pressures in the long term. “We are confident of growth indicators and it is just a matter of time before all can be restored to glory days,” he said referring to the 3.1% projected growth rate for 2019. In other words, the good signs may not be visible immediately. Things will get better in the long term.
The inflation trajectory is worrisome. While government believes that the solutions to the problem are already at play, the average man on the street needs to start seeing the results sooner rather than later.