Inflation is a strange creature. Zimbabwean inflation is a creature that could not be imagined by the most creative writers the world has known. Yet Zimbabwean citizens are all too familiar with how wild inflation can be. June 2023 has once again reminded us of just how wild a ride it can be. Month-on-month inflation hit post-dollarisation (2009) highs at 74.5%. A figure which was unheard of even during the Zimbabwean dollar inflation era. Year-on-year inflation for June 2023 stands at 175.8%. This was after multiple measures were introduced in the economy to quell the flame of inflation.
Year on Year
After a few months of declining inflation measured by Blended CPI inflation, all hell has broken loose. Year-on-year inflation more than doubled from the previous month’s 86.5%. To put it in simple terms, prices rose twice as fast in June as they did in May. At 175.8%, Zimbabweans are paying more than twice what they paid for the same goods and services at the same time last year. This comes after multiple measures were instituted by both the Ministry of Finance and the Reserve Bank of Zimbabwe in the last two months alone.
For a little perspective, Professor Steve Hanke, who measures inflation based on purchasing power of the currency (exchange rate), measures Zimbabwe’s inflation at 1296% year on year. No matter how you look at it, these are surely not the results the Ministry of Finance and the Reserve Bank of Zimbabwe desired when they released a slew of measures.
In this week's Hanke's Inflation Roundup, #Zimbabwe takes the first place, again. Hanke measured Zimbabwe’s inflation at 1298%/yr.#Zimbabwe #ElectionsZW pic.twitter.com/d7tMJkgMDQ
— ZDI (@zditrust) June 27, 2023
Month on Month
The real headline is the month-on-month inflation. To grasp the meaning of 74.5% month-on-month inflation, we have to ditch our usual 12-month chart in favour of a chart that looks at month-on-month inflation from February 2009 when Zimbabwe ditched the original Zimbabwean Dollar (ZWD) for a basket of currencies. Even at the height of (the second) Zimbabwean dollar inflation, it was almost half the inflation rate experienced in the Blended CPI in June 2023. To put it in simple terms, Zimbabweans paid close to double for goods and services that they paid in the previous month.
While Blended CPI is heavily weighted toward the US dollar, the mayhem in the currency market cannot be ignored. The Zimbabwean has been in a tailspin recently on both the parallel and official markets. While there have been signs of retracement of the decline, the US dollar buys between 7000 and 10000 Zimbabwean dollars on the market.
Back to the drawing board?
With attempts to stabilise the currency and halt inflation having failed dismally in the short term, we should expect more tweaks and adjustments going forward. The Zimbabwean dollars tailspin is alarming. We can rest assured that the Ministry of Finance and the Reserve Bank of Zimbabwe authorities will respond sooner rather than later.
