In June, the last time the government published annual inflation figures, it had stood at 176 percent
Inflation headache … Finance minister Mthuli Ncube on Wednesday met with World Bank president David Malpass on the sidelines of the United Nations General Assembly in New York
HARARE – Zimbabwe’s year-on-year inflation for August “reached almost 300 percent” in August, the International Monetary Fund said on Thursday as it urged the Zimbabwe government to intensify efforts on economic and political fronts.
An IMF team completed a two-week mission to the crisis-weary country this week as the government faces a growing chorus of criticism over its commitment to reform.
“Since the February currency reform, the exchange rate has depreciated from USD 1:1 ZWL to USD 1:16.5 ZWL (as of September 23), fostering high inflation, which reached almost 300 percent (year-over-year) in August,” the IMF said in a statement.
In June, the last time the government published annual inflation figures, it had stood at 176 percent.
The latest estimates are stoking fears of a return of the kind of hyperinflation that wiped out savings 10 years ago when the economy collapsed and prices of goods and services skyrocketed every week.
Early last month Finance Minister Mthuli Ncube said the government would stop publishing inflation figures until February next year to allow the statistics agency to collect fresh data using the new currency since prices were no longer pegged in US dollars.
The US dollar had been the national currency since 2009 when the country trashed its own currency following hyperinflation of as much as 500 billion percent.
But in June, Zimbabwe ended the use of US dollars and other foreign currencies and replaced them by two local parallel currencies – bond notes and coins and electronic RTGS dollars – to be collectively known as the Zimbabwe dollar.
Zimbabwe is feeling the effects of a drought that has hit crops and electricity generation, while soaring prices and shortages of foreign currency and fuel have sparked anger among a restive population.
President Emmerson Mnangagwa’s opponents say the government is failing to implement political reforms, including amending security and media laws, which are seen as preconditions to improving ties with the West.
“Policy actions are urgently needed to tackle the root causes of economic instability and enable private-sector led growth,” the IMF, which visited Harare to review progress on a staff-monitored programme, said.
“The key challenge is to contain fiscal spending consistent with non-inflationary financing and tighten monetary policy to stabilise the exchange rate and start rebuilding confidence in the national currency.”
The IMF said the economy faced a steep contraction this year.
“GDP growth in 2019 is expected to be steeply negative, as the effects of drought on agricultural production and electricity generation, impact of Cyclone Idai, and the significant fiscal consolidation to correct past excesses serve to drag on growth,” the statement continued.
The IMF said that social conditions had “deteriorated sharply”, with more than half of the country’s population unlikely to be able to feed itself adequately between now and the next harvest season in the first half of 2020.
“Weakening confidence, policy uncertainty, a continuation of FX market distortions, and a recent expansionary monetary stance” had increased pressure on the exchange rate, it said.
Mnangagwa, on taking over from Robert Mugabe in a military coup in 2017, promised to revive the economy and declared Zimbabwe “open for business”.
But nearly two years later, the economy is floundering and many Zimbabweans say they are worse off than they were under Mugabe, who died on September 6. – Reuters/AFP