The inflation of Zimbabwe rose from 0.48% in April to 0.75% in May this year according to the Zimbabwe Statistics. What is more significant about this rise is that it is the highest increase since September 2013. Since February this year, inflation has been rising making May the 4th month without a recession. To some the steady increase in inflation rate translate to a good future but others it is the return of the 2008 hyper inflation. It is essential to understand the context in which this inflation rise takes place to understand what the future holds for the country.
The Deputy Governor of the Reserve Bank of Zimbabwe (RBZ) Dr Kupukile Mlambo, said that inflation rise could translate to something good during a business Indaba.
“This positive trajectory is expected to be reinforced by the general recovery of the economy in 2017 on account of the expected strong agricultural outturn, which is going to increase disposable income.” the RBZ Governor John Mangudya noted according to Bulawayo 24.
The inflation rise comes at a period where Zimbabwe had a good rainfall season translating to good harvests. This had a good impact to the government’s agricultural program the Command agriculture.
However, this is not what other economists think.
A regional think tank NKC economist, Chantelle Matthee believes that inflation is going to continue rising.
“Zimbabwe’s economy remains under pressure due to low liquidity. The country urgently needs to stimulate production to increase exports and foreign exchange inflows, which in turn will place the central bank in a stronger position to alleviate the cash shortage.” said Matthee to the Daily News.
The statutory Instruments 64 (SI.64) restricted the importation of some goods into the country. In such a scenario inflation can be caused by the demand of goods. Scarcity of goods in the country can result in the rise in prices and generally translating into inflation.
The inflation rise has come in an era where the country has recently faced more company closures sending hundreds of people out of work. Last year more that 200 companies closed down. The increase of goods in Zimbabwe may make life hard for the country since a lot of people are unemployed or have are living below the poverty datum line.
If inflation continues to rise and industries continue on low production, there is likelihood that the country can find itself back in the 2008 hyperinflation.