Zimbabwe inflation hits the 20.8% mark, RBZ targets 7%
The Consumer Price Index (CPI) for the month ending October 2018 stood at 118.73 compared to 101.97 in September 2018 and 98.24 in October 2017.
The prices as measured by the all items CPI increased by an average of 20.85 percent between October 2017 and October 2018.
According to the latest Zimstat numbers which the agency says were collected during the period covering five days around 15 October 2018 when parallel market rates hit record highs, the upsurge in the annual inflation rate for October was mainly driven by food inflation which carries a 31.98 percent weight on the total CPI basket.
Mnangagwa, who took over when Robert Mugabe was toppled a year ago following almost four decades in power, has pledged to revive the southern African economy, pay off arrears and lure investors. After winning the July vote, he appointed Cambridge University-trained economist Mthuli Ncube as finance minister.
A 2% tax Ncube imposed on electronic transactions from October 1 in a bid to raise income to repay billions of dollars in debt and ignite the economy contributed to the surge in inflation as businesses insisted on cash when there isn't any.
The result, in a country that abandoned its own currency in favor of a basket including the greenback and the rand in 2009 after inflation reached an estimated 500 billion percent is that electronic dollars trade at a discount to hard cash.
The government's so-called bond notes have also dropped in value and the levy contributed to shortages of fuel and consumer goods. Mnangagwa has said the tax measure would be reconsidered.
ZimStats reports that YoY Inflation jumped to 20.85% in October 2018- the highest official inflation rate since Dollarisation. The ZimBollar Adjusted CPI index (ZACPI) stands at 244%. Using the ZACPI, prices have gone up by 3.44 times from October 2017 to date. pic.twitter.com/8th3z38bUO— Zim Bollar Index (@ZimBollar) November 13, 2018
Meanwhile, The Reserve Bank of Zimbabwe is targeting the 7 percent mark on inflation in the medium term since such levels enhance long term growth of the economy.
This came up when Dr John Mangudya was making a presentation during the pre-budget seminar in Bulawayo last week.
By inflation-targeting, the central bank is looking at enhanced public understanding of monetary policy, increased central bank accountability and the general improved environment for economic growth.
Dr Mangudya indicated that RBZ remains committed to contain inflation within the growth-enhancing levels of 3 percent to 7 percent, which are necessary to preserve purchasing power and foster wage stability.
Given this scenario, the central bank has come up with value preservation strategies meant to cushion Zimbabweans and these include offshore financing of critical imports like fuel, wheat and cooking oil.
All this is done to create space for domestic productivity which is the hallmark of any viable economy.