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Zimbabwe Tops Africa’s Price Index Amidst Economic Challenges

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HARARE,— Zimbabwe has emerged as Africa’s most expensive country, according to a recent study conducted by the African Development Bank (AfDB) on power purchasing parities (PPPs) and exchange rates across the continent.

The AfDB report highlighted that Zimbabwe’s persistent hyperinflationary environment until recently has significantly impacted its price levels. The introduction of the Zimbabwe dollar (ZWL) as the primary currency in 2019, following a decade of dollarisation, initially aimed to stabilize the economy. However, rapid depreciation ensued, with the exchange rate plummeting from ZWL 6.32 to the US dollar at launch to ZWL 33,903 by April 5 this year, when it was replaced by the Zimbabwe Gold (ZiG).

This depreciation has contributed to Zimbabwe’s high PPP, indicating elevated price levels relative to the region’s average. AfDB’s findings placed Zimbabwe ahead of Cabo Verde, Djibouti, Seychelles, and South Africa in terms of price levels.

“The price level index (PLI), which compares a country’s PPP to its currency’s exchange rate against the US dollar, reflects Zimbabwe’s higher-than-average prices in the region,” AfDB stated in its report.

Official statistics from last month indicated that an individual in Zimbabwe requires approximately ZiG 624.44 per month for survival, equivalent to approximately US$46.39. However, market dynamics often disregard official figures.

Both the International Monetary Fund (IMF) and World Bank have raised concerns about the methodologies employed by the Zimbabwe National Statistics Agency (ZimStat) in collecting data, urging transparency and access to underlying data.

Speaking at the Zimbabwe Investment and Capital Markets Conference in the United Kingdom, Finance Minister Mthuli Ncube addressed concerns over currency reforms and economic stability. He emphasized the government’s commitment to reigning in the exchange rate and maintaining macroeconomic stability through prudent fiscal and monetary policies.

Ncube highlighted the extension of the multi-currency system until 2030 to facilitate a gradual de-dollarisation process. He underscored the introduction of Zimbabwe Gold (ZiG) in April 2024, backed by a composite basket of foreign currencies and precious metals, aimed at enhancing currency stability.

“Since the introduction of ZiG, we have observed significant stability, with month-on-month inflation registering at -2.4% in May 2024, and stability in both official and parallel market exchange rates,” Ncube affirmed.

The minister outlined the government’s vision for a private sector-led economy, with the state playing a facilitating role in ensuring a conducive macroeconomic environment, investing in infrastructure, education, and healthcare.

“Private sector investments, particularly foreign direct investment, will complement national development efforts by enhancing technology transfer, strengthening value chains, and improving overall competitiveness,” Ncube concluded.