Paul Nyakazeya, Group Digital Editor 
Official inflation rate is divorced from reality.
SINCE the wave of price increases that hit Zimbabwe late last year, ordinary Zimbabweans have been baffled by the mismatch between the official inflation rate and the level of price increases.
To many — whose disposable incomes have significantly lost buying power in recent months, the official inflation rate is far from reflecting the gaping margins with which basic goods prices have gone up — there is a huge mismatch.
According to the Zimbabwe National Statistics Agency (ZIMSTAT) the month-on-month inflation for June was -0,05 percent after shedding 0,08 percentage points on May’s 0,03 percent.
The Agency said year-on-year inflation rate for June 2018 as measured by the all items Consumer Price Index (CPI) stood at 2,91 percent, after gaining 0,20 percentage points on the May 2018 rate of 2,71 percent.
This means that prices as measured by the all items CPI increased by an average of 2,91 percent between June 2017 and June 2018.
But the stakeholders’ sentiment is that the official inflation rate is divorced from reality.
“The inflation figures do not reflect the price increases consumers are witnessing,” Denford Mutashu, Confederation of Zimbabwe Retailers president, told the Financial Gazette.
“…there is a growing mismatch between real and official inflation figures,” he said.
He blamed the hard currency crisis as the reason behind price increases, arguing that it was aptly reflected by developments on the flourishing black market.
“… efforts by the RBZ (Reserve Bank of Zimbabwe) in terming the foreign currency scourge have not been matched by errant financial institutions that have been busy diverting the forex to undeserving companies,” Mutashu said, adding “the priority list has not been observed”.
“The aggregate effect of forex …is the current parallel market rearing its ugly head, pushing prices northwards, as demand for forex is not matched by supply,” he said.
“The price increases currently in the economy is due to the cost of money , shortage of foreign currency, cost of fuel,” Mutashu said.
Consumer Council of Zimbabwe (CCZ) figures indicate that the consumer basket increased by $12 to $591 for an average five-member household’s shopping bill over the past four months.
While monetary authorities maintain that the bond note is at par with the United States dollar, the unique currency — launched November 2016 — has significantly lost value against the greenback.
Trust Chikohora, an economist, said though unacknowledged, the parallel market rate was the reason behind price increases.
“The main cause of price increases is the increase in the parallel market rates for foreign currency which is caused by a shortage in the country. Most of the products are imported and local manufacturers use imported raw materials,” he told The Financial Gazette.
According to ZIMSTAT, the month-on-month inflation rate for May 2018 shed 0,05 percentage points on Aprils’ 0,08 percent to 0,03 percent, while the inflation rate for April gained 0,33 percentage points on the March rate of -0,25 percent.
John Mangudya, central bank governor, said the inflation level in the country was stable, arguing it is “acceptable”.
He accused companies and individuals increasing prices each time there was an artificial shortage, resulting in panic buying among nervy Zimbabweans.
Mangudya said the “unjustified price increases” were making current inflation levels appear to be artificial to some sections of society, including a handful of business people.
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