The good news continues to roll when it comes to the inflation picture in Zimbabwe, for now. Year on year inflation registered another drop from 56.37% in July to 50.24% in August, a much smaller drop than we have become accustomed to in recent months. Month on month inflation meanwhile stood at 4.18% meaning a 1.62% increase from the July 2021 rate of 2.56%. Pressure on parallel market exchange rates, which are still a major driver in pricing has brought a little uncertainty to the inflation picture going forward.
On a year on year basis the picture is clear, things are certainly much better than they were 12 months ago. With prices increasing at a rate that is 13 times slower than they were at the time. The RBZ and the ministry of Finance will certainly point to the improved practices from their side that have contained money supply growth and therefore inflation. Especially at a time when the parallel market rate which was previously blamed for inflation is on a rampage. While at 50% we are certainly not at stability yet, we are certainly on the path to it. The target for below 10% inflation year on year is firmly in sight after just missing the July 55% target.
As we have come to expect month on inflation will jump and down. We are still some way off from seeing month on inflation figures that would guarantee the below 10% year on year figures we want to see. The increase from 2.56% to 4.18% can be attributed to the accelerated depreciation of the Zimbabwean dollar on the parallel market. More on this in a bit. The increase was seen mostly in non-food inflation which registered a 4.95% month on month while food and non-alcoholic beverage inflation brought down the overall rate, which was 3.14%. Not unexpected as the bumper harvests reported in the media would result in a reduction of prices in fresh food and produce in the short term.
The parallel market rate, once the devil blamed for the sharp price increases we experienced has resumed its rampage. Year to date it has risen by roughly 67% depending on sources. Of course, the parallel market rate played a large part in the informal sector which dominated the landscape. Thanks to the auction system making foreign currency available to the formal sector, availability is the real problem here, pressure and dependence on the parallel market are believed to have been alleviated. Now that talk of foreign currency allotments being delayed on the auction market could we be seeing a return to the parallel market by some funds that had since exited?
