20 October 2017

Zimbabwe: Inflation On the Rise

Significant price increases have been noted throughout the country during the month of September according to a survey by the Zimbabwe Statistics Agency ( Zimstats)

In its latest survey, Zimstats says households are paying more for meat, liquid fuels and other goods. Economist Trust Chikohora says the prices have increased due to the increasing exchange rate.

"There has been inflationary pressure largely driven by the parallel market exchange rate and we've seen prices going up" said Chikohora, a former president of the Zimbabwe National Chamber of Commerce. "The inflation rate could have actually been higher judging on the US dollar rate on the parallel Market."

Traders in Zimbabwe are operating on a three- tier system where the prices of goods and services depend on the mode of payment with a difference of up to 50%.

Chikohora said this payment system has been mostly caused by the shortage of foreign currency in the country.

"The foreign currency shortage has enabled the parallel market to specialize in foreign exchange since retailers can not access foreign currency from the bank," he said.

"As long as there is a shortage of foreign currency and as long as long as we continue to import a lot of our goods and raw materials, prices are expected to continue rising."

Another economist , Brains Muchemwa says there are number of factors that contributed to the increase in prices.

" Social Media played a huge part in raising speculation on food shortages which resulted in panic buying among consumers. The exchange rate also contributed in the rise of prices"

Muchemwa says going forward, prices can only be controlled by traders being rational about prices by practicing business ethics.

He added that the shortage of foreign currency has also been escalated by speculative behaviour.

According to Zimstat the inflation rate for September gained 0.64 percent on the August rate of 0.14 percent. Inflation, which averaged 1.6 percent in 2013, now stands at 0.78 percent.

In September, Zimstat observed price increases in rice, breakfast cereals, macaroni and noodles while increases were also observed in cooking oil across the country.

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