ZIMBABWE’S inflation edged to 51,55 percent in September from 50,24 percent in August, reflecting price increases across the economy in a month the country grappled with shortages of power and foreign currency.
On a month-on-month basis, the inflation rate at 4,73 percent was up 0.51 percentage points, marking the highest monthly rise in a year.
While on the surface these might seem like marginal movements, which ordinarily would not warrant much attention, the numbers have sparked a great deal of anxiety among economic analysts, policymakers and even the ordinary folk all because of the country’s storied past with inflation.
The 2008 bout, which saw record inflation of 500 billion percent, did not only make Zimbabwe a global standard for economic ruin, but it scarred the nation’s psyche up till today and perhaps into the future.
Reserve Bank of Zimbabwe, governor John Mangudya and Finance Minister Mthuli Ncube
You can be sure that when the statistics agency releases inflation data, whether positive or negative, its integrity will be questioned. It will generate a great deal of debate at home and abroad.
Some academics have become world-famous by claiming to be experts on Zimbabwe’s inflation trends. The country’s hyperinflation story is a favourite study area for economics students to whom the concept is more abstract than foreign.
On the local front, Zimbabwe’s inflation discourse is usually unnecessarily exaggerated with frantic headlines and commentaries, while the other side goes into overdrive to try and convince everyone else that all is well.
Following the slide of the local currency on the parallel market in the last few weeks, the monetary authorities have said this defies economic fundamentals as the country, according to them, has enough USDs to avert this rapid fall of the local unit.
The central bank’s Financial Intelligence Unit (FIU) has now identified 29 individuals accused of abusing mobile money transfer platforms to mop up foreign currency on the black market.
The FIU instructed banks, mobile money operators and other financial service providers to freeze any accounts operated by these individuals and bar them from accessing financial services for a period of two years. But despite these efforts, we should know better. Policing the exchange rate is not enough. This approach has been tried before and it did not work then.
Markets are a matter of demand and supply. When the auction system was functioning well (meeting demand) the results were there for all to see. There was an undeniable increase in volumes across the board as firms got access to hard currency to finance the importation of raw materials and critical spares.
The nuisance money changers almost disappeared from the streets as the exchange rate stabilised. But now without access to foreign currency, companies are resorting to the parallel market. This is not fake news or a false alarm. The streets are swarming again with money changers.
You cannot make up the fear about the return of inflation. And also, the risk of the economy sliding into the dreaded inflation spiral is not without merit, but maybe just a bit out of measure. Basing on this year’s bountiful agricultural output as well as the nearly US$1 billion worth of special drawing rights from the International Monetary
Fund, Zimbabwe’s economy is generally sound. Also reassuring was the commitment by authorities that half of this amount will be used to shore up the country’s reserves and boost the tanking local currency to restore confidence.
Revolving funds will also be set up, from part of the windfall, to help manufacturers and mining companies buy new equipment, and to revive the horticulture industry by encouraging the cultivation of roses, macadamia nuts and blueberries.
But one has to understand and appreciate the long-term emotional impact that hyperinflation and institutional breakdown have had on Zimbabweans.
The legacy of economic ruin on the nation’s psyche is insidious, pervasive and long enduring. Inflation is at the back of everyone’s mind. Every adult Zimbabwean makes daily economic decisions with inflation at the back of their minds. It is not a foreign concept.
It takes generations until society fully heals from periods of deep instability. A study in the early 2010s showed that Germans were more worried about inflation than about developing a life-threatening disease such as cancer yet hyperinflation in the country ended almost 100 years ago.