The poverty datum line, a measure used to calculate how much money is required by a group or individual to survive, for Zimbabwe shot up by 42% in October. A family of 5 persons now requires $3192 (US$197 at the interbank rate) to meet basic expenses. A household income lower than that is considered to be below the poverty line. The 42% jump mirrors the jump in month on month inflation which after a few months of recovering shot back to 38.75%, just 0.51 percentage points shy of its highest level since 2009, achieved in June 2019
Taking into account Zimbabwean income levels, with average salaries believed to be around $800 (US$50) four of the five individuals in the average family would need to be employed in order to be above poverty. The situation is dire for Zimbabweans as the scourge of inflation continues to grow bolder with every month. The irony, of course, is that since Mthuli Ncube’s move to separate bond notes and US dollars that triggered a decline in the local currency the Minister promised Zimbabweans a decline in inflation in October. Evidently this has not come to pass.
The harsh reality is that inflation in truth is likely higher than the figures ZimStat and the Reserve Bank of Zimbabwe have presented. While choosing to blackout year on year inflation data for reasons that do not quite add up. The implied rate based on ZimStat is 440% while Professor Steve Hanke calculates inflation in Zimbabwe is nearer to 600% year-on-year.
Government efforts to address the rampant inflation continue to fail dismally. A cocktail of policies that have ranged from the disastrous to the comical has failed to inspire confidence in the local currency which was reintroduced in February 2019 and has lost 80% of its value since then on the parallel market. No inroads have been made into dealing with the cause of inflation while the nation has been visited by a terrible drought year which has threatened both food security and power generation. Placing pressure on the exchange rate as food and energy have had to be imported.
Policy inconsistency has also dogged the cash strapped government which has found little joy with investors in spite of President Mnangagwa globetrotting for 2 years spreading “Zimbabwe is open for business” mantra. In the last 7 days alone the Ministry of Finance proposed a law which requires importers to declare their source of foreign currency only for the cabinet to announce that all individuals and companies are allowed to import with no questions asked. During his 2020 budget presentation, Mthuli Ncube announced the dropping of government subsidies on maize and other grains however President Emmerson Mnangagwa recently announced that government subsidies would continue after social media was awash with images of Mealie Meal (10kg) going for $110.
There are few if any positive signs in the Zimbabwean economic picture. Retail volumes down, imports down, prices up and no sign of currency stability any time soon.