Zimbabwe’s inflation figures don’t add up

Zimbabwe’s annual inflation rate remained unchanged at 4.3% in February, according to official statistics released on Thursday. On a monthly basis, the rate of price rises facing Zimbabwean consumers edged up only slightly from 0.46% in January to 0.49% in February.

These official figures suggest that prices are rising at a slower annual rate in Zimbabwe than in neighbouring countries. Zambia reported a 6.0% annual inflation rate last month, for example, and South Africa most recently recorded a 6.3% inflation rate in January.

Tony Hawkins, an economist at the University of Zimbabwe and member of the Reserve Bank of Zimbabwe’s monetary policy committee, believes that “the figures don’t stack up”. They are “not realistic”, he said in a telephone interview earlier on Friday.

The consumer price index (CPI) data released by Zimbabwe’s National Statistical Office — Zimstat — suggested that prices have increased at just over 1.0% in the three years since the country abandoned its local currency after a prolonged period of hyperinflation.

According to the International Monetary Fund, the only other country in the world to experience such a low rate of inflation over the same time period was Japan, a country which has long battled deflation or falling prices. The IMF, according to Hawkins, “reckons Zimbabwe’s inflation rate has been closer to 6%”.

Hawkins believes that one of the reasons the numbers are so inaccurate is that Zimbabwe’s consumer price index — compiled based on the average prices of a fixed basket of consumer goods — gives a 30% weighting to food prices. Most African countries weight food at around 50%, he says.

John Robertson, an independent economist based in Harare, agrees that something is amiss in the data.

“[CPI] numbers have not gone up in the last three months, very much against expectations,” Robertson said, “Government increased import duties on food in January, but the food [price] index has yet to move.”

Robertson argues that Zimbabwe’s highly competitive retail environment may partially explain the situation. Zimbabwe has experienced a significant expansion in supermarket and other retail space since 2009’s “dollarisation” (abandonment of the local currency primarily in favour of the US dollar and South African rand). And, more recently, retailers increased their stocks around the Christmas holidays.

Although reliable retail sales figures are not available in Zimbabwe, Robertson believes that retailers are experiencing a surplus of goods. As evidence, he cites the fact that retailers have yet to repay the banks for the borrowing they undertook late last year to stock up. As a result of this, and other factors, Zimbabwe’s retailers have not been able to achieve price increases, keeping inflation in check.

“There is very little liquidity [in the country] and cash is just not available.” As a result, he argued, “retail sales have suffered over the past few months”.

Although the two economists cite different possible explanations for the data’s unreliability, they both believe that the official statistics are painting a “more and more distorted picture”, as Hawkins explained.

Robertson agrees. “I think there is a certain amount of political interference in the numbers.”

Consumer price index (CPI) figures compiled and released by Zimstat are one of very few economic statistics regularly available in the troubled nation.

In South Africa, dozens of economic variables — from inflation measures to tourism statistics — are released — predictably, regularly and reliably — by Statistics South Africa (Stats SA). This information, in aggregate, provides a useful snapshot of the country’s economy to policymakers, economists, investors and businesses. Zimbabweans do not enjoy the same luxury.

An online visit to Zimstat on Friday morning resulted in a message informing visitors that the website is down. The same happens with a visit to the Zimbabwe Stock Exchange (ZSE), which was hacked in August of last year and has been “under maintenance” ever since.

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