Zim inflation hits two year high as it rises to -0.65% in January
HARARE – Zimbabwe’s inflation continued on its upward trend to reach its highest level in more than 24 months in January, according to data released on Wednesday by Zimstats, as consumers spent more for bread, cereal, fish, sea food, oils and fats and other products.
“The year on year inflation rate for the month of January 2017… stood at -0.65 percent, gaining 0.28 percentage points on the December 2016 rate of -0.93 percent”, said the Agency. Inflation last averaged -0.2 percent in 2014 and has been on an upward spiral since July 2016 when it recorded a relatively lower rate of -1.6 percent.
Prices of bread and cereals’, which have a weight of 10.98 percent to the total consumer price index, surged by 1.86 percent. Fish and sea food prices also rose by 1.1 percent.
“The month on month inflation rate in January 2017 was 0.23 percent gaining 0.18 percentage points on the December 2016 rate of 0.06 percent”, said Zimstat.
Costs of goods and services have also been rising over the past few months as a result of increased greenback shortages which forced some economic agents to resort to the black market where they pay a premium of up to 25 percent to get the erratic US dollars. The premium is then passed to the final consumer, which increases the general price level.
Economists say Zimbabwe is now in the phase where inflation is now creeping in from below in a liquidity crisis. According to Dr Tinashe Nyamunda, a postdoctoral fellow at the University of the Free State, as Zimbabwe is largely dependent on imports, whether via legitimate routes or clandestinely; demand for foreign exchange is likely to rise forcing pressure on exchange rates. “But instead of too much money chasing too few goods as was the case in 2008, even if the drip-feed system of currency supply is observed, inflation will creep in because of import demands. This will shift money mostly into the hands of importers, whether informal/irregular cross-border traders or big corporations as they seek to replenish supplies.
“Ultimately, the poorer will have less access to even those bond notes whose value will be compromised by exchange rate pressures.”
Gas prices however took a -9.17 percent dip, with actual rental for housing falling by -6.39 percent, while the prices of fruit also fell by -7.97 percent.
As the government is targeting to increase aggregate production in the economy this year, driven by the 2017 National Budget theme – “Pushing production frontiers across all sectors of the economy” – it is important that more concrete supply side interventions be put in place to abet the operations of productive sectors.
The country’s month-on-month food and non-alcoholic beverages inflation rate also significantly jumped up to 0.80 percent in January 2017, gaining by 0.42 percent on the December 2016 rate of 0.38 percent.