eBusiness Weekly
Tawanda Musarurwa
Zimbabwe’s month-on-month rate of inflation slowed to 15, 13 percent from 17, 64 percent previously, according to latest figures from the Zimbabwe National Statistical Agency (Zimstat).
The decline in the monthly rate of inflation may be attributable to a number of factors including depressed demand and initiatives by the monetary authorities to curb the illegal foreign currency market, which has been pushing the depreciation of the local currency.
The country’s monetary authorities have been tightening the screws on speculative tendencies on the Zimbabwe dollar during the current quarter, while household consumption has been dragged down by low incomes.
The COVID-19 pandemic has also had an impact on demand over the past weeks.
The annual rate of inflation has maintained an upward trend, albeit at a slower rate for the latest period.
According to Zimstat, the year-on-year inflation rate (annual percentage change) for the month of May as measured by all items stood at 785, 55 percent.
This was a 19,98 percentage increase from the previous month’s rate of 765,57 percent.
Zimbabwe’s inflation rate jumped to 676, 39 percent year-on-year in March 2020 from 540, 16 percent the previous month.
And by April, the annual rate of inflation had jumped to 765, 57 percent.
During this period, the parallel market rate spiked from around 30 to the United States dollar to levels of around 70, as activities on the black market went uncontrolled.
The Reserve Bank of Zimbabwe (RBZ) reiterated this week its view that the spike in the parallel market rate was purely speculative.
“Depreciation in the exchange rate, observed over the past few weeks, was largely a result of behavioural and other non-monetary factors such as negative perceptions, adverse expectations, speculative tendencies of economic agents and tracking of the Old Mutual Implied exchange rate (OMIR), which was quoted at around $140/US dollar over that period,” said the RBZ in its latest report on reserve money supply.
“The depreciation was divorced from economic fundamentals, as it occurred immediately after the opening of the tobacco selling season, which is traditionally associated with stability and appreciation of the local currency.
“In addition, the introduction of the $10 and $20 notes did not represent increase in money supply but a substitution effect – from electronic dollars to physical notes.”
Since then the RBZ’s Financial Intelligence Unit has implemented a number of measures to curb speculation on the local currency, including freezing flagged mobile money agent lines, limiting Zipit and bank transactions and shutting down mobile lines of individuals and/or entities advertising illegal foreign currency dealings on social media platforms.
Meanwhile, Zimstat also said the Consumer Price Index (CPI) for the month ending May 2020 stood at 1097, 65 compared to 953, 36 in April 2020 and 123, 95 in May 2019.
