RBZ revises year-end inflation forecast upwards as currency weakens

Zimbabwe's annual inflation rate could end the year between 35 percent and 53 percent, up from an earlier estimate of 25 percent to 35 percent, the central bank said in a statement shared with reporters on Monday, as the local currency has dropped sharply on the black market.

Policymakers in the southern African country still haunted by memories of hyperinflation and currency collapses had initially wanted to bring inflation to below 10 percent by year-end but have revised that target higher twice now.

Inflation fell steeply in the first half of the year, from around 363 percent year on year in January to 56 percent in July, before stabilising above 50 percent in August and September.

"Developments on the parallel market for foreign exchange are likely to exert further inflationary pressures in the economy," the central bank's governor, John Mangudya, said in the statement dated September 27.

"In view of recent developments, annual inflation is likely to end the year between 35 percent to 53 percent, up from the revised year-end targets of between 25 percent and 35 percent."

On the black market, the Zimbabwe dollar has weakened from around 130 to the U.S. dollar in April to 170 currently for electronic transactions.

Over that time the official rate has gone from about 84 to 87 to the U.S. currency.

Much of Zimbabwe's economy relies on the black market to source scarce foreign currency, despite the central bank insisting the economy is generating enough dollars to meet demand.

Finance Minister Mthuli Ncube said in July that gross domestic product was expected to grow 7.8 percent this year after two years of recession, helped by higher commodity prices and an improved crop harvest.