The month of may continued the streak of good news for the year on year inflation in Zimbabwe as measured by ZimStat. A 32.16% reduction in the year on year inflation leaves it at 161.91%, a far cry from the recent highs of over 800%. However, on the month on month front, we witnessed an uptick of 0.96% making the May month on month inflation 2.54%. While inflation levels are still very high, especially when compared to incomes the progress made here is undeniable, at least per ZimStat measures.
The slight uptick in the month on month inflation corresponds with a recent increase in the money supply in the nation particularly in reserve money as per the reserve money report published by the RBZ a week ago. While 2.54% is significantly higher than last months 1.58%, Zimbabweans will be grateful it is nowhere near the dizzying heights of nearly 40% experienced just a year ago.
Meanwhile, year on year inflation registered its lowest level in 2 years. You’d have to go back as far as June 2019 to see a lower inflation figure than 161.91%. The battle has been long fought for the RBZ and it is without the discipline that has been shown in money supply growth containment that has brought about the reduction in the rate of price increases. The reserve money report shows that reserve money has only grown 22.12% year to date. Compare this with staggering increases of over 200% in the last year and the progress is undeniable.
The reduction in inflation rates is also backed by professor Steve Hanke’s measure which using purchasing power parity (PPP) as opposed to the consumer price index (CPI) method that ZimStat relies on. In the April update, Hanke’s PPP method showed inflation around 150% year on year.
Prices are still going up
While the reduction in inflation is certainly a win the levels of inflation experienced in Zimbabwe are still very high. More so when we compare them to wage and largely static income levels. Paying 60% more for goods than we did last year is still a heavy burden for Zimbabwean citizens to bear. And the increase in the month on month inflation is worrying especially with our target to get year on inflation below double digits, we would want to keep this below 0.83% to achieve that goal.
Winning the fight
Inflation forecasting is something like calling a test cricket match in the first session of the first innings, nobody who has any idea what they are talking about dares do it. It is complicated because one-minute things are looking great but collapses happen in a matter of minutes. Things are certainly moving in the right direction but as the pessimists will remind you the longer without something going wrong, the closer you are to the next time something will go wrong.