Zimbabweans will have to contend with rising prices of goods and services in the foreseeable future amid warnings by analysts that the June slowdown in the rate of inflation is only on paper and not supported by major improvements in economic conditions.
The country’s annualised rate of inflation, the highest in the world, trekked backwards to 1 184,6% in June from an all-time record high of 1 193,5% in May.
But analysts immediately dismissed the latest decline in the rate of change of prices as not reflective of the real situation on the ground and called for a major review of the government’s skewed foreign-exchange policy as well as far-reaching political and economic reforms to address the economic meltdown.
“Judging by the rate at which prices have been going up, the new [inflation] numbers are a world apart from the reality on the ground,” said respected Harare economist James Jowah.
Massive price increases during the past month were recorded for fuel, urban commuter fares and basic foodstuffs.
The price of some brands of orange syrups leapt from about Z$425 000 per two-litre bottle to more than Z$800 000 for the same quantity, while commuter fares rose from an average Z$60 000 a trip to between Z$100 000 and Z$120 000 for the same trip.
The major driver of price increases during the past month was the continued slide in the value of the Zimbabwe dollar on the foreign-exchange market. It slipped from about Z$340 000 for every United States dollar on the unofficial foreign-currency market when the last inflation figures were released in mid-May to the current Z$450 000 against the US unit.
The bulk of the trade in foreign currency takes place on the illegal but thriving unofficial or parallel market, compared with the official inter-bank market where the greenback has been fixed at Z$101 195 for more than three months.
“This points to growing underlying pressure for the general price level to rise even further in the coming months unless there is a serious attempt to address the problem of the weak exchange rate,” noted a senior official with a financial institution who asked not to be named for professional reasons.
The Harare authorities have resisted pressure to devalue the local unit, fearing that such a move would push up their own cost of servicing government debt — believed to be about $4-billion.
The government has also interfered with the running of companies by fixing prices of basic commodities, a situation that has forced most manufacturers to go underground, only supplying their products to a robust black market.
Hyperinflation highlights an acute economic crisis gripping Zimbabwe for the past seven years and which has also spawned shortages of fuel, electricity, essential medicines, hard cash and just about every basic survival commodity.
Western donors and the main opposition Movement for Democratic Change blame the crisis on repression and wrong policies by President Robert Mugabe, such as his seizure of productive farms from whites for redistribution to landless blacks.
The farm seizures destabilised the agricultural sector — the mainstay of the economy — and caused severe food shortages after the government failed to give black villagers resettled on former white farms skills training and inputs support to maintain production.
But Mugabe, the only ruler Zimbabweans have ever known since independence from Britain 26 years ago, denies mismanaging the country’s once-vibrant economy and says its problems are because of sabotage by Western governments opposed to his seizure of white land. — ZimOnline