ZIMBABWE’S escalating year-on-year inflation surged last month to above 400% amid growing fears it will rise above the record 600% soon due to inflationary pressures unleashed by a massive excha
nge rate adjustment.
The Central Statistical Office said the October annual rate – a key economic indicator – was 411%, a 51,2 percentage points increase from September’s rate of 359,8%.
This puts central bank governor Gideon Gono’s December inflation rate projection of between 280-300% in serious doubt.
Gono has shifted his inflation forecasts for year-end from between 20-35% earlier this year to between 35-50% and later to 50-80% before settling for 280-300%.
Gono all but admitted policy failure in his statement last month as he appeared to be losing the war against inflation and unrelenting economic decline. He, however, once again maintained that “failure was not an option” even though social and economic conditions were dramatically deteriorating.
Year-on-year inflation rose from 265% in August to 359% in September before climbing to 411% last month. In a report last month, the International Monetary Fund (IMF) said inflation would rise above 400% next month.
“The year-on-year inflation in October 2005 was 411,0%, gaining 51,2 percentage points on the September rate of 359,8%,” the CSO said yesterday.
“This means that on average goods and services normally purchased by households for final use in Zimbabwe were 5,11 times as expensive in October 2005 as they had been 12 months before, in October 2004.”
Non-food inflation accounted for 414,7%, which was a 23,3 percentage points increase on the September figure of 391,4%, while food and non-alcoholic beverages inflation was 407,5%, a 99,3 percentage points rise on last month’s rate.
On a year-on-year basis, the items which recorded the highest increases in prices were bicycles, postal services, and hair dressing salons. On a month-on-month basis regional airfares, electricity charges and railway fares recorded the highest increases.
The continued rise in inflation, which is tearing apart the fabric of the economy, heralds a further deepening of the economic crisis.
The country is beset by foreign currency shortages which have in turned caused the scarcity of fuel, power, drugs, spares, production inputs, and basic commodities.
Zimbabwe resumed negotiations for a US$500 million loan from South Africa to pay for imports and settle debts. Sources said Finance minister Herbert Murerwa and Gono had travelled to Pretoria for talks twice in the past two weeks. Negotiations have been stalled by conditions of political and economic reform tied to the loan.
The IMF said recently Zimbabwe’s economy would shrink by 7% this year, after a 4% contraction last year and 10,5% in 2003. The central bank claims the economy will grow by 2-2,5% even though it cannot support its assertions with credible evidence.
United States ambassador to Zimbabwe Christopher Dell last week said the Zimbabwean economy had been ruined by “gross mismanagement and corrupt rule”, contrary to officials claims it was undermined by drought and Western sanctions.
Dell also said Zimbabweans’ standards of living had been taken more than 50 years backwards due to economic failure. He was summoned to the Ministry of foreign Affairs over the remarks – the most forthright by an ambassador – and given a warning on Wednesday.