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Tapiwanashe Mangwiro
Business Reporter
Consumer prices in Zimbabwe rose in January, primarily driven by increase in food and non-alcoholic beverages, according to the latest statistics by the Zimbabwe National Statistics Agency (ZimStat).
In ZiG terms (the domestic currency), monthly inflation surged to 10,5 percent in January, a significant increase from December’s rate of 3,7 percent, the ZimStat statistics show.
The US dollar Consumer Price Index rose 11,5 percent in January from 0,6 percent increase in December.
Zimbabwe operates under a dual currency system, with transactions primarily conducted in foreign currency, predominantly the US dollar, alongside the local ZiG.
The prevalence of foreign currency transactions is partly attributed to the high level of informality within the economy.
Some analysts argue that the Government’s crackdown on illegal imports has contributed to rising US dollar prices.
This is because the reduced supply of cheaper, illegally imported goods has led to increased demand and higher prices for existing stocks.
Further, the Government’s anti-smuggling efforts may have inadvertently driven up prices. By forcing imports through formal channels, these goods now incur duties, which are ultimately passed on to consumers in the form of higher prices.
However, long term, prices are expected to stabilise as the market starts operating on the expected level playing field as envisaged by authorities.
The month-on-month inflation for food and non-alcoholic beverages in ZiG stood at 6,8 percent, while non-food inflation reached 12,5 percent.
Food and non-alcoholic beverages inflation in US dollar terms surged to 16,8 percent, while non-food inflation reached 9,1 percent.
The Weighted Consumer Price Index, which combines ZiG and US dollar indices, rose to 125.40 in January 2025 from 112.39 in December 2024, reflecting a month-on-month inflation rate of 11,6 percent.
Food and non-alcoholic beverages inflation in the Weighted CPI category reached 13,2 percent, while non-food inflation climbed to 10,6 percent.
The ZiG experienced a tumultuous start to the year after huge infrastructure expenditure necessitated a ZiG devaluation six months after replacing the Zimbabwe dollar.
The devaluation significantly impacted the ZiG inflation, which surged 166,30 points in subsequent months to December 2024.
US dollar inflation also accelerated due to the widening exchange rate fluctuations between June and September but temporarily eased as the devaluation narrowed this gap.
Since the devaluation, the exchange rate and inflation have exhibited some stability, primarily due to central bank interventions characterised by tight liquidity and elevated ZiG interest rates that have curbed speculative spending.
The tight ZiG liquidity has dampened demand for the US dollar on the parallel market, resulting in a stabilisation of parallel market rates between ZiG 36 and ZiG 38 per US dollar.
In its January 2025 report, ZimStat also provided updated figures for the Food Poverty Line (FPL) and Total Consumption Poverty Line (TCPL), offering a clear perspective on living standards.
The FPL, which represents the minimum cost to meet daily energy requirements, was ZiG 861,14 per person.
The TCPL, which includes both food and non-food essentials, stood at ZiG1,255.78 per person.
Peter Tanyanyiwa
Online Reporter