There is common knowledge that election season comes with many promises with varied delivery rates. One thing that should be talked about more is how election season brings about some results. As Zimbabwe prepares for harmonized elections the latest inflation statistics from ZimStat show that year-on-year inflation took another dip while month-on-month inflation remained negative though it registered an increase.
Year on year
Year-on-year inflation continued on the recovery path after peaking two months ago. In August year on year, inflation was reported at 77.2%. Down from 101.3% the previous month. That means Zimbabweans are paying a little below double what they paid last year for goods and services. Understandably many facets of the nation and economy have spent the month in a wait-and-see mode. This is not to take away from the work of the Reserve Bank of Zimbabwe and The Ministry of Finance in reigning in the money supply growth that has fuelled exchange rate depreciation and therefore inflation. According to the mid-term monetary policy the inflation target for the end of year is between 60 and 70%. So we are not far off it. That said there is a lot of time between now and year end.
Month on month
Month-on-month inflation remained negative in August though it registered a significant uptick up to -6.2% from -15.3% in July. Let’s make sense of this; it means Zimbabweans are paying 6.2% less than they did for things the previous month. This is deflation; Prices are lower than they have been in the short term. This is after getting a price reduction of 15.3% the previous month. So Zimbabweans have enjoyed the better end of things in recent months. However, this comes on the back of that all-time high month-on-month inflation figure of 74.5% from June. We have observed many times with inflation data that upward trends do not reverse easily or for long, so the developments over the last 2 months will have many cautious about the future.
The mid-term monetary policy set the direction going forward and it will be interesting to see how the goes. The past hasn’t gone well when it comes to inflation targeting. What we must always remember about our inflation data is that it is now based on Blended CPI, which is dominated by US dollar-based transactions. Due to the stability of the US dollar (real value unit), it will understate changes in the CPI. To put things into perspective the Total Consumption Poverty Line for one person in August was ZWL$91063.00. At the official auction rate that is US$19.89.