Zimbabwe’s annual inflation may breach the upper cap of 25 percent target in 2021 on surging global commodity markets, supply disruptions, stimulus interventions and currencies depreciation induced by the coronavirus pandemic.
Finance and Economic Development Minister Professor Mthuli Ncube forecast annual inflation to be in the range of between 22 and 35 percent in December this year.
Initially, authorities had projected Zimbabwean inflation would be between 10 and 15 percent.
The central bank later revised inflation to 25 percent, citing soaring import prices.
Minister Mthuli said good farm yields have helped to insulate the country from inflation shocks after global food prices soared due to Covid-19.
“Despite increases in international prices for most agriculture products by more than 20 percent since January 2021, domestic food prices have remained stable owing to the bumper harvest recorded in 2021,” said Minister Mthuli said while presenting the 2021 budget review yesterday.
Central Bank governor Dr John Mangudya told Business Weekly in an interview on Tuesday that the rise in global inflation had raised the risk of imported inflation.
“We have seen significant increases in prices of commodities such as soya crude oil, cereals while the freight cost have also drastically gone up,” said Dr Mangudya.
The rise in global inflation is mainly driven by supply disruptions, food shortages, stimulus interventions and currencies depreciation induced by Covid-19 pandemic.
Global inflation has been surging since 2020, having risen since the emergence of Covid-19 pandemic in both advanced economies, emerging and developing economies.
Inflation in the US accelerated to higher levels of 5,4 percent in June 2021, a peak since 2008 during the global financial crisis. It is projected to continue on the rise over the remainder of this year but within targeted ranges in most countries.
Economist Professor Gift Mugano said annual inflation projections of around 30 percent were very “realistic and achievable.” “The Ministry of Finance and Economic Development and the Reserve Bank of Zimbabwe, in particular, have done well in managing budget deficits and money supply respectively which, combined, has sustained inflation developments on the downward part,” said Prof Mugano.
“However, as we remain optimistic about this positive trajectory, key government departments and state owned enterprises must not derail this trajectory through knee jack prices increases especially in key utilities such as electricity, water, transport and fuel.”
Inflation reached a double digit in July this year for the first time in almost two years. Year on year inflation rose 56,7 percent in July from a year ago, compared with 106,6 percent in June, statistics from the Zimbabwe National Statistics Agency show.
Post the multi-currency regime, commonly referred to as dollarisation, Zimbabwe had the highest annual inflation rate at 837,5 percent in August last year.
On a month-on-month basis, inflation was at 2,56 percent from last month’s rate of 3,88 percent. The stabilisation of the exchange rate following the introduction of the foreign currency auction system in June last year has seen prices moderately stabilising.