President Mnangagwa of Zimbabwe

Zimbabwe annual inflation hit 175.66 per cent in June up from 97.85 per cent in May, statistics agency ZIMSTATS said on Monday, the highest rate since 2009.

ZIMSTATS said on a month-on-month basis, the consumer price index rose 39.26 per cent in June compared to 12.54 per cent in May, nearing the monthly 50 per cent figure that would mark the start of hyperinflation.

Prices of basic goods from sugar to cooking oil to building materials soared during the month as much as 200 per cent, the agency added as the local currency fell.

Zimbabwe abandoned its currency after inflation peaking at 500 billion per cent in 2008 wiped out pensions, savings and any vestiges of confidence in the unit.

The high inflation is piling pressure on a population struggling with shortages and stirring memories of economic chaos a decade ago.

The figures cast a shadow over President Emmerson Mnangagwa’s bid to revitalise an economy that suffered decades of decline and bouts of financial chaos under veteran leader Robert Mugabe’s near four-decade rule.

Abrupt changes in monetary policy and dire economic readings, some dating back to before Mnangagwa took over in 2017, have spooked locals and investors alike.

“The economy is in bad shape and conditions continue to worsen,” said Jee-A van der Linde, economist at NKC African Economics.

“There is no doubt that the economy is going to suffer a contraction this year.”

The southern African state has experimented with a few forms of tenders from quasi currency bond notes to electronic iterations, though foreign currencies such as the U.S. dollars and South African rand dominated local transactions.

In June, Mnangagwa’s government surprised the market when it brought back a national currency – making the interim unit the sole legal tender, renaming it the Zimbabwe dollar and banning the use of foreign currencies for local transactions.

The new sole tender has tumbled 27.9 per cent since then, lingering at 8.77 against the dollar in official exchanges on Monday.

Exchange rates on the black market showed the pressure even more: the greenback fetched 10.5 Zimbabwe dollars on Monday.

Zimbabweans have continued to suffer shortages of hard currency, fuel and bread in recent years. Public anger burst out into street protests in January.

With a vast chunk of economic activity being in the informal sector, many analysts suspect the inflation numbers are significantly understated.

“If things continue to deteriorate like they have, it is probable that prices can snowball into a hyperinflation scenario,” van der Linde said.

The government is under pressure to raise wages for its workers and its offer of an average increase of 97
Zimbabwe dollars ($11) a month, was rejected by unions last week as too little.

Finance Minister Mthuli Ncube said last week he expected the monthly inflation rate to start to fall from October. (Reuters/NAN)