Zimbabwe’s economy relapsing to 2008 era?

By Wellington Zimbowa
ZIMBABWE’s hyperinflationary environment has hit a ‘new low’, becoming the highest in Africa, with skyrocketing prices, as latest data from the Zimbabwe National Statistics Agency (ZIMSTAT) reveal inflation hit 785.55% in May 2020, evoking fears over the country relapsing into the 2008 era, where the country hit a world inflation record.
The country sits on pole position in Africa on inflation and comes second, globally, after Venezuela.
Critics indict authorities for rampant corruption, misplaced priorities, and policy discord, while the government lays the blame on economic sanctions and sabotage.
Covid-19 has also stagnated global economies, with a huge impact on the already tethering Zimbabwean economy, due to the lockdown that disrupted business and production.
According to the latest inflation data, month on month inflation rate in May 2020 was 15.13%, shedding 2.51 percentage points on the April rate of 17.64%, while the Consumer Price Index for the same period is pegged at 1.097.65 compared to 953.36 in April 2020, and 123.95 in May 2019.
As the exchange rate tumbles, the local currency shed around 90% value on the formal market, thus fuelling inflation.
Government’s insistence on a US$1:25 local exchange to the greenback against the prevalent US$1:80 exchange rate on the black market has not helped issues, coupled with growth in the money supply.
Citing data published by the Reserve Bank of Zimbabwe, the ZIMSTATS report for December 2019 shows that the Reserve Money closed 2019 at $8.9 billion; however, a new RBZ report changed the December figure to $10.33 billion, a higher base. The result is an understatement of Reserve Money growth, in the first quarter of 2020.
The government’s ZWL18 billion stimulus package to cushion industry and business against the Covid-19 pandemic is also set to increase the money supply and drive inflation further.
The delicate economic situation in the country has spurred a cat and mouse game between authorities and forex dealers, as the government is desperate to stem the parallel market that is increasingly popular to the public, due to its high exchange rates.
Old Mutual Implied Rate, which has largely taken as the intermediary rate shows an exchange rate of US$1:171 against the greenback painting a gruesome picture of the monetary situation in the country.
The central bank, through its Financial Intelligence Unit (FIU) arm, has since declared war on anyone seen publicizing parallel market rates.
Earlier, ZIMSTAT reported that the Food Poverty Datum Line for one person in April 2020 was $596.96 with $2,984.78 for an average household of five persons.

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