Zimbabwe’s inflation update for May brought some terrible news for Zimbabweans. After switching to blended CPI inflation, which weighted 70% of the pricing in US dollars, the inflation picture looked better. The authorities took a step further and stopped ZimStat from publishing Zimbabwean dollar-based CPI inflation. While Blended CPI understates inflation, you’d be hard-pressed to see the difference. Year-on-year inflation clocked in at 86.5%, while month-on-month inflation reached 15.7%.

Year on Year inflation

Zimbabwe year on year inflation May 2023

Our chart has historical Blended CPI inflation, and we can see that inflation is on the rise again. After claiming a few months of decline, the wheels have come off. This is not a nouvelle occurrence. Inflation has often been contained briefly, but the efforts have proved unsustainable. What’s alarming is that 70% of Blended CPI is in US dollars. Given how sticky US dollar prices are, this leaves us with a major jump in Zimbabwean dollar pricing. This would be consistent with what we know is happening to the Zimbabwean dollar on the official and parallel markets.

Month on Month

Zimbabwe month on month inflation May 2023

The month-on-month inflation picture presents a closer look at the developments. At 15.7%, it is close to comparable inflation rates at the peak of inflation in 2022. More alarming is that just 3 months ago, when the switch was made to Blended CPI, inflation was negative. The sharp rise in inflation has spurred the Minister of Finance into action not once but twice in the month of May alone. Unfortunately, the first attempt did not achieve desired results, and there is nothing to suggest the second attempt will fair any better.

Ultimately, changing the measure of inflation can only window-dress the issue. The causes of inflation are still present, and they do not care much about how inflation is measured. Credit to the Minister of Finance, who, in the latest statement, candidly pointed to money supply growth as the problem that the government is trying to address. And rightly so. While the current measures seem unlikely to affect the root cause looking at the correct problem is the silver lining to our cloud.