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Inflation figures doubtful

During that period, both government and independent economists published different inflation rates, with the government official figure always being the lowest. Independent economists argued that things were much worse than what the official inflation rate depicted, and they seemed right considering the rate of price increases at the time.

At the peak of hyperinflation, government ceased releasing inflation figures. The last official inflation rate released under the hyperinflation era was approximately 231 000 000% in July 2008.  Independent economists on the other hand attempted to come up with their own estimate of inflation at the peak of hyperinflation. However, inflation had reached ridiculous levels and the figures were almost nonsensical, with some stating figures as high as 90 000 000 000 000 000 000 000% (90 sextillion %).

As a result of dollarisation in February 2009, hyperinflation was halted. In fact the country went into deflation for some months after dollarisation, as the economy adjusted to the use of multiple currencies. Official inflation in 2009 ended the year at -7,7% before rising to 3,2% by the end of the year in 2010. This appeared normal since we were coming from a period of deflation.


The year 2011 also registered a year-on-year increase of 1,7 % after inflation closed the year at an official rate of 4,9% against independent estimates of 6,5%. This year, government revealed that it is targeting an annual inflation rate of 5% and is confident this level can be achieved. Recently, Zimstats released March CPI figures which indicated a slowdown in inflation during the month. Month-on-month inflation was down 0,06 points to 0,43%, while year-on-year inflation slowed down to 4% after recording a decrease of 0,3 percentage points from February.

Even though official figures suggest that inflation is easing off, prices seem to be going the other way. General observation shows that the month of March alone witnessed significant increases in food prices when the rand firmed, and yet month- on- month inflation for food and non-alocholic beverages inflation is said to have come off by 0,22 percentage points.


Also, during the same month, fuel prices were adjusted upwards by about 3%. Fuel price increases have a major influence on the CPI not only directly but also because fuel has a bearing on the prices of most other goods in the CPI. However, according to Zimstats, from February 2012 to March 2012, the CPI for domestic electricity, gas and other fuels is said to have gone down by 0,26%, which raises a red flag! on whether the figures are accurate.

Likewise, the decrease on year- on- year inflation is also questionable. During the period March 2011 to March 2012, there have been a number of policies implemented by government which have resulted in price increases. When government reintroduced duty on basic commodities, retailers were quick to adjust their prices upwards to cushion themselves against the effect of duty.


Local producers also increased their prices in tandem to match those of imports. In addition, there was a significant increase in electricity tariffs in September, which went up by approximately 30%. Similarly, retailers also tend to increase prices when the rand firms, but when the rand weakens against the dollar no downward review is made. Therefore prices tend to be sticky downwards, which fuels the country’s inflation.

Independent economists believe that inflation might end the year at 9,5%, and some are touting double digit figures. Their argument is that the imposition of duty and surtax on certain foods is likely to push food inflation upwards, which has already happened but is not reflected in the current CPI figures. Higher utility tariffs continue to be a burden to consumers, and there is a high probability that they might be increased further.


Wage demands, especially from the civil service, will likely have a negative impact on the inflation rate if they are met. Two-thirds of the population is estimated to be living under the poverty datum line, which means that the wage war is far from over. Being an election year, government is likely to come up with populist policies which will involve an increase in government spending. Inflation can only go upwards in such a scenario.

The IMF also believes that the official inflation figures could be understated and believe that they could reach 6,2% by year end. They cite the same reasons of increases in food and fuel prices and higher wage demands as the main drivers of inflation. Even our economic growth rate figures have been revised downwards, which could indicate that the government might be a bit aggressive on the economic performance indicators.


An analysis of the CZI consumer basket for a family of five shows an increase of 35% from the US$427,11 estimated in May 2009 to the last published figure of US$576,69 in January 2012. Loosely, we can conclude that prices of basic commodities have risen by 35% since dollarisation, which is a huge contrast to the official inflation figures over the years.

It would appear the current methodology of calculating inflation is flawed. This was also hinted at by government itself when they reinforced the need to restructure and revitalise CSO structures and data collection methods. A significant weight of 31,9% is allocated to food and non-alcoholic beverages, while categories such as education and communication are given minimal weightings of 2,9% and 0,99% respectively.


Long ago, the structure would have worked as education and communication did not constitute a substantial allocation of consumer spending. With the advent of mobile phones and new communication technologies, the contribution has significantly increased. A weighting on communication of 0,99% is not an accurate representation of communication costs to the total consumer basket. 


The CSO figures seem to focus on conventional communication means such as telephones and postal services. Furthermore, school fees are turning out to be one of the major cost burdens for the consumer.  Although increases are done periodically, they are usually material and the impact is significantly felt.

Despite contradicting reports by independent economists and the IMF that our official inflation figures could be understated and that the official year-end figures could be unachievable, government remains adamant. Although it would be desirable for the country to maintain low inflation rates, the odds are against us and the reality on the ground is that inflation is possibly on an uptrend.


There is need for a thorough revision of the methods used to calculate the CPI. Technical assistance can be sought from the IMF to update the CPI groups and the reallocation of weights to reflect the changes in the spending patterns over the years. Most importantly, a survey could be carried out which will come up with the current spending patterns. Independent and official inflation rate figures should converge at some point or the variance should be narrowed.

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