According to the latest data from ZIMSTAT, Zimbabwe’s annual inflation now stands at 280.4% down from 285% back in August 2022. This marks the first time annual inflation has fallen since January 2022 when annual inflation fell to 60.61% down from 60.74% in December 2021. Monthly inflation for September 2022 was 3.5% down from 12.5% back in August 2022. This generally supports what we have been seeing in the market. Prices are not falling down as some politicians have claimed, they are just increasing at a slower rate than before.
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NB You can see inflation figures for Zimbabwe since August 2018 here.
Tight monetary measures paying off
There was alarm in the economy when inflation rose over the 250% mark back in July and the rate threatened to breach the $1 000 ZWL mark. The government responded with a series of novel measures including putting a stop to most payments to government contractors. Government contractors are often companies owned by politically exposed persons (PEPs) who would “bid” for tenders and get awarded tenders even though they quoted inflated prices. A famous example is a company called Blinart which wanted to supply laptops to the government at an eye-watering price of US$9 000 per laptop even though the cost of this was around just US$1 200. These contractors would get paid in ZWL turn around and flood the foreign currency black market with their ill-gotten wealth causing the rate to spiral.
Most illegal foreign currency street dealers worked for these contractors who are in turn often connected to government officials. This afforded the dealers an umbrella of protection and explains why most were never really arrested despite the government’s tough laws on illegal foreign currency dealers. However, deprived of their cheap source of ZWL, most dealers are a pale shadow of their former selves. They are unable to offer the same outrageous rates they once did before. This has caused the black market rate to stabilise around the $820 ZWL mark for those buying and selling large amounts. To further pour salt into the wounds of street dealers the government also introduced gold coins which other contractors have been buying instead of foreign currency on the streets further depriving street dealers of ZWL>
In contrast, the official rate has been on a sustained upward movement since July. On the afternoon of 25 July 2022, the official rate was $423.4934 ZWL. By yesterday, 26 September 2022, the official rate was now $614.6237 ZWL per 1 USD. This means the Zimbabwean dollar has officially lost an astounding 45% of its value since the end of July. That partly explains why prices are continuing to rise even though black market rates are stable official rates are not.
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