Inflation slows again

The month-on-month inflation rate for August 2019 slowed to 18,07 percent after shedding 2,97 percentage points on July’s 21,04 percent.

According to the Zimbabwe National Statistics Agency, (Zimstats) this means that prices as measured by the all items CPI (Consumer Price Index), increased by an average rate of 18,07 percent from July 2019 to August 2019.

“The month-on-month inflation rate is given by the percentage change in the index of the relevant month of the current year compared with the index of the previous month in the current year,” said Zimstat.

Figures from Zimstats show that the month-on-month food and non-alcoholic beverages inflation rate stood at 18,55 percent in August 2019, shedding 1,35 percentage points on the July rate of 19,90 percent.

At 17,79 percent, the month-on-month non-food inflation rate was 3,93 percentage points below the July rate of 21,72 percent.

The decline in month-on-month inflation in August does not necessarily mean prices of goods went down.  On the contrary, they continued to rise but at a much slower rate than the prior month (July).

According to the Zimstats figures, prices of medical aid contribution increased by an average of 29 percent compared with 83 percent in July while clothing and footwear prices increased by 10 percent against 27 percent.

The prices of meat and vegetables went up by an average 10 percent each in August against 17 percent and 26 percent in July.

Prices for actual rentals for housing, domestic services and household services as well as postal services remained stable.

However, the cost for telephone and telefax services, transport services, electricity and bread increased at a much faster pace in August compared to July.

Should the gap between the rate of increase in comparative months continue to narrow, the prices can be expected to start normalising within months and eventually followed by a trend reversal.

Finance and Economic Development Minister Professor Mthuli Ncube has also emphasised efforts will be put in place to tackle inflation and bring it to a single digit figure through among others, fiscal measures to deal with wasteful expenditure.

The Reserve Bank of Zimbabwe in its Mid-Term Monetary Policy Statement has also indicated that it “shall vigorously pursue its primary objective of maintaining price and financial stability”.

“Despite the elevated risks to inflation, emanating mainly from adverse inflation expectations and some lingering price distortions, which require fine tuning, the Bank is fully committed to containing money supply growth, to ensure long-term price stability in the economy.”

Historically, inflation has skyrocketed in Zimbabwe linked to fiscal indiscipline and a high trade deficit as imports outstripped export receipts. Additionally, wasteful Government expenditure in particular created excess money supply, which triggered high demand for US dollars to pay for imports and store value.

“The major outstanding challenge in winning the inflation battle, is to ensure that funding for inescapable Government expenditures, such as grain imports, fuel and summer cropping working capital requirements, are contained within budget, so as to minimise recourse to potential inflationary Central Bank financing,” reads the Mid-Term Monetary Policy statement.