Central bank governor cooked up figures to hide the true extent of inflation.
An internal Reserve Bank of Zimbabwe study pegged inflation in mid-February 2006 at 2114 percent.
The Central Statistics Office told the nation on 13 February that inflation was 613 percent having risen from 585 percent in December 2005.
United States ambassador to Zimbabwe Christopher Dell said Gono admitted to cooking the figures after he challenged him that inflation exceeded 1 000 percent.
Full cable:
Viewing cable 06HARARE183, INFLATION SOARING EVER HIGHER
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S E C R E T SECTION 01 OF 02 HARARE 000183
SIPDIS
SIPDIS
AF/S FOR BNEULING
NSC FOR SENIOR AFRICA DIRECTOR C. COURVILLE
USDOC FOR BECKY ERKUL
TREASURY FOR J. RALYEA, B. CUSHMAN
PASS USTR FOR FLORIZELLE LISER
STATE PASS USAID FOR MARJORIE COPSON, ERIC LOKEN
USDOL FOR ROBERT YOUNG
US MISSION GENEVA FOR JOHN CHAMBERLAIN
E.O. 12958: DECL: 12/31/2009
SUBJECT: INFLATION SOARING EVER HIGHER
REF: A. HARARE 178
¶B. TD-314/10975-06
¶C. HARARE 098
¶D. HARARE 046
Classified By: Ambassador Christopher W. Dell for reason 1.4 b/d
¶1. (SBU) The GOZ’s Central Statistical Office (CSO) reported
February 13 that the annualized rate of inflation reached 613
percent in January, up from 585 percent in December (ref D).
Food and non-alcoholic beverages, which make up nearly one
third of the consumer price index basket, posted an annual
increase of 785 percent. The cost of housing rose by 56
percent in the month, driven largely by a huge one-month jump
of 239 percent in rates. Passenger transport costs (about 4
percent of the CPI basket) increased 1507 percent for the
12-month period. The CSO reported that the total consumption
poverty datum line for a family of five increased to over
Z$20 million/month (US$201 at the interbank exchange rate of
Z$99,200:US$1 and US$125 at the parallel market rate of
z$160,000:US$1). At the same time, a family of five required
Z$7.8 million/month just for food.
¶2. (C) The more respected PricewaterhouseCoopers Cost of
Living Analyses put the January annualized cost of living
increase at 993 percent for low-income earners, 819 percent
for the high-income category, and 710 percent for
middle-income earners. Driving low-income inflation was rent
(up 2400 percent for the year for a 2-room accommodation),
consumables (up 1919 percent) and “other food” (up 1030
percent and dominated by sharp increases in the price of
sugar, margarine, salt, flour, and mealie meal- Zimbabwe’s
staple food). (N.B. mealie meal has practically disappeared
from shop shelves around the country in the last few weeks.)
The steepest annualized increases for high-income earners
were in use of a second vehicle (up 1921 percent), holiday
spending (up 1614 percent), and consumables (up 1573
percent). Middle-income earners experienced sharpest
increases in transportation (up 3638 percent), consumables
(up 1772 percent), and medical expenses (up 1406 percent).
¶3. (S/NF) Zimbabweans accept that the inflation rate is
actually much higher than officially reported and Reserve
Bank Governor Gideon Gono did not dispute Ambassador’s
contention during an encounter last week (ref A) that it
exceeded 1000 percent and admitted that he was cooking the
numbers to hide the true extent of inflation. Indeed,
sensitive reporting indicates that a recent internal Reserve
Bank study pegged the inflation rate in mid-February at 2114
percent and predicted it would continue to increase due to
the Bank’s inflationary policies (Ref B).
——-
Comment
——-
¶4. (SBU) 1000 percent? 2000 percent? What really matters is
that no end to inflation’s trajectory is in sight. Moreover,
with wages stumbling behind these extraordinary inflation
figures, mid-level civil servants, soldiers and police
officers, even MPs, who had once been comfortably in the
middle class, now live below the poverty line. Looking
ahead, the effective freezing of the official foreign
exchange rate in January (ref C) will force importers to
source forex on the parallel market, thus driving prices up
further. Significant Treasury Bill maturities coming due in
the next months will also increase money supply growth and
fuel inflation. We anticipate that shortage-induced price
increases will be a principal driver of inflation burdening
those suffering at the bottom of the socioeconomic ladder.
Street-level resistance to higher prices, as real disposable
incomes shrink and consumers recover from heavy January
outlays for school fees, rent and rates, will be insufficient
to counter these pressures significantly.
DELL
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