AS Zimbabweans begin to feel the bite of the current wave of price increases and soaring cost of living, there is growing suspicion and concern that the official inflation rate does not quite reflect the economic reality on the ground.
Ask any ordinary person, how much food prices have increased in recent months — particularly after Statutory Instrument 64 of 2016 which imposed a ban on certain imports and protected inefficient companies and their poor products as well as the introduction of bond notes — they will tell you prices have definitely more than doubled in some cases.
Yet the latest official data paints a different picture.
This has triggered a debate on whether the country’s statistical agency is cooking up inflation figures. While Zimstat says inflation has been gradually increasing and has gone up by only about 1% in September, independent economists have however questioned the statistics.
Early this month, Zimbabwe risked lurching into a renewed meltdown amid rising inflation, shortages of some basic commodities and fuel. This came as bond notes had lost a third of their value and the Real-Time Gross Settlement (RTGS) system surged above 50% in real exchange rate terms.
Official figures show that headline inflation rose nearly to 1% as prices went up by an average of 0,78% in September compared to the same period last year.
Following the crashing of the bond notes on the parallel market and the widening of the RTGS gap against the United States dollar, prices shot up, triggering panic buying and fuel shortages which were later contained through short-term interventionist measures.
Among the key drivers of inflation in September were food and non-alcoholic price rises which went up 2,49%. The cost of raw materials for household products such as edible products also shot up during the same month, eroding the consumers’ purchasing power.
Research firm Equity Axis, in its weekly advisory note, questioned the authenticity of inflation figures released by Zimstat.
“In our monthly inflation update for August, we highlighted that the official statistics were grossly misrepresenting the reality of inflation in Zimbabwe. We estimated that inflation was now between 8% and 10% given our assumptions,” the research firm said.
“We went further pointing that at the rate at which the RTGS and bond notes are being discounted in the parallel market, the rate of inflation will go up at a faster pace. True to the forecast prices notched up around the 20th of September as producers and retailers reacted to the market panic at the spontaneous shift in parallel market exchange rate. While pockets of differentiated pricing existed at a lower scale before September, the trend became common market-wide with legit shops and service providers adjusting prices accordingly in anticipation of supply disruptions due to higher exchange rates.”
Renowned US applied economics expert Professor Steve Hanke said the bond notes introduction to alleviate cash shortages dramatically fuelled inflation.