ZIMBABWE’s year-on-year inflation rate ended the year 2020 at 348,5% down from a high of more than 800% in July but analysts say it is no cause for celebration as it remains way too high.
“The year-on-year inflation rate (annual percentage change) for the month of December 2020 as measured by the all items Consumer Price Index (CPI) stood at 348,59%,” the national statistical body, Zimstat revealed this week .
The month-on-month inflation rate in December 2020 was 4,22 % gaining 1,07 percentage points on the November 2020 rate of 3,15 %.
The month-on-month food and non-alcoholic beverages inflation rate stood at 6,54 % in December 2020, gaining 2,63 percentage points on the November 2020 rate of 3,91 %. The month-on-month non-food inflation rate remained at 2,63 % as it was in November 2020.
The southern African nation’s inflation reached a post-dollarisation high of 837,53% in July last year. However the rate has been on a downward trend ever since. This is after the central bank intensified the clampdown on mobile money agents and Zimswitch Instant Payment Interchange Technology (Zipit) transactions to curb parallel market activities and contain the Zimbabwe dollar from further plunging. Government also suspended trading on the Zimbabwe Stock Exchange in June before reopening a month later.
Economic analyst Prosper Chitambara said while the fall in the inflation rate is a positive development, the cost of living remains very high.
“I think it is a good development. We need to sustain this positive trend and this can be maintained through the good rainfall season and sustained fiscal discipline,” Chitambara said.
“However the inflation rate remains way too high. For the man on the street the drop in inflation remains insignificant. The cost of living remains very high.”
He said for the drop in inflation to make a significant impact on the man on the street, it must drop to 20% or below.
Economist Godfrey Kanyenze pointed out although there has been a drop in the inflation rate, it does not improve the lives of the Zimbabweans who are hard hit by the high cost of living.
“Although inflation has dropped from more than 800%, it is still a triple figure digit and is still very high which makes it difficult for the average worker,” Kanyenze said.
Economist Victor Bhoroma highlighted that the extensive usage of the US dollar and slow growth in money supply has assisted in taming runaway inflation.
“The widespread usage of the US Dollar and slow growth in money supply have been key in taming runaway inflation. The level of inflation for December was higher than the 300% targeted by the government but was remarkably lower than the 838% recorded in July 2020,” Bhoroma said.
“It was largely expected considering the fact that pressure on the parallel market has eased significantly due to widespread usage of the US Dollar by consumers. Producers and retailers can now easily replenish stocks without resorting to the high parallel market premiums which often translate to higher retail prices.”