The latest inflation statistics show a continued inflationary trend of prices in Zimbabwe that will worry the authorities. While a cocktail of measures slowed the growth and publishing of the parallel market exchange rate and efforts have been made through an auction system that has flaws to avail foreign currency to businesses, prices in July did not respond to these measures. Year on year inflation clocked 857.53%, a post dollarisation record high and a step closer to 1000. Month on month inflation pushed up to 35.53%, the third-highest month on month inflation has been since dollarisation.

At 857.37% year on year inflation will continue to be a thorn in the side of the government as it shows the plight of Zimbabweans. Analysts expected year on year inflation for July to come in around 780%. After a slight dip in the previous month (June) hopes of a turnaround were dashed with the latest results. The trend is upward despite the Reserve bank of Zimbabwe’s attempts to arrest the parallel market exchange rate, which is where businesses for a long time had been forced to access foreign currency. The parallel market exchange rate has for a long time been touted as being responsible for pricing and inflation but the parallel market rate has been relatively stable playing between 85 to 100 since mid-June.

Zimbabwe hyperinflation
Month on month inflation, after two consecutive months of decline (April 17.64% and May 15.13%) the June turnaround to 31.66% was buttressed by a further 35.53% for July. The up-and-down trend we have noted in the past seems to be continuing. The high 30’s month on month figure is the third-highest month on month inflation has been since dollarisation in 2009 and a clear sign that the worst is not behind us as a nation.

Reserve Money update

RBZ money supply

The RBZ published another reserve money update that shows some interesting correlation with the inflation figures. As the table above extracted from the RBZ’s reserve money update illustrates, reserve money balances for the year to date peaked in July according to preliminary estimates. This increase was explained by increases in the currency issued, banking sector deposits and bank liquidity. Ultimately money supply increases have correlated closely with inflation movements in the country.

Still on the rampage

Many promises were made by both the Minister of Finance and the Reserve Bank Governor that inflation would be turned around. None of these came to fruition and the financial frustration is mounting. The foreign currency auction system has been in operation for nearly two full months, despite its operation and lower foreign currency rate it still excludes too many players to be effective in containing price movement.