Zimbabwe’s inflation has zoomed past the danger mark in recent days making basic commodities beyond the reach of the common man. An inflation rate of 175.66%, the highest ever in the decade has pushed up the prices of bread and cooking oil. The last time the country faced the hyperinflation was in 2008 and 2009 when spiraling prices created havoc in the country. To add oil to the fire, in the last weekend, the government for the third time in recent days, hiked the prices of fuel by 16%. Since January 2019, the fuel prices have tripled, creating a cascading effect on prices of almost all goods including essential commodities.
The report coming from Zimbabwe indicates that the life of the common man has become difficult and they do not have money to buy even medicines and food items. Of late, the government is taking some harsh steps to address hyperinflation. Transactions in foreign currency have been banned since June this year, a step towards curbing shortages of food items.
Incidentally, Zimbabwe’s fiscal and monetary trends are strange in the sense that in a time horizon of 30 months or so, the economy has cruised from deflation to triple-digit inflation. It may be noted that in May this year, the inflation was 97.7%, from a deflationary trajectory before January. The inflation in Zimbabwe had peaked in 2008, which compelled the government to abandon the Zimbabwean dollar and announce the return of national currency. The government also banned the foreign currencies like the U.S. dollar and South African Rand, which were widely used over the past decades for domestic transactions. The country introduced a quasi-currency -bond notes-for domestic transactions, which cannot be transacted outside the country. The electronic equivalent of the bond notes, known as the RTGS$, is the Zimbabwe dollar that has to be used for settling foreign transactions.
Economists are apprehensive that the hyperinflation combined with distortions in the exchange rates will drive the people into the black market, further straining the availability of essential goods and services. Despite all these measures, the prices of food, clothing, furniture and health care increased by more than 200% in June compared to a year ago. Can these measures rein in inflation is the billion-dollar question being asked by the economy watchers.
