Zimbabwe admits it will not meet year-end inflation target

Zimbabwe has admitted that it will not be able to meet the inflation target of 25 to 35% by the end of this year predicting instead that inflation could be between 35 and 53%.

It says this is largely because of the surge in the black market rate of the local currency which is now trading at between $130 and $160 to the United States greenback, which translates to a premium of over 70%.

Inflation rose from 50.24% in August to 51.55% in September reversing the downward trend that began in January.

United States economist, Steve Hanke who uses the parallel market rate to calculate inflation, put the rate at 82.29% as of yesterday, 30 September.

The Reserve Bank of Zimbabwe is cracking down on illegal foreign currency dealers but it is not clear whether this will work or not.

The country’s largest industrial body, the Confederation of Zimbabwe Industries, has lamented the surge in the parallel market rate saying it is dampening motivation for exporters who have to surrender part of their earnings at the official rate now at $87.67 to the United States dollar. It says there is a premium of 63% on the black market rate.

The CZI, however, says what is baffling is that the exchange rate was stable when inflation was 837.5% in July last year but has become unstable now when inflation is down to 51.6%.

“In general, it is expected that the currency in a country where there is higher inflation rate would depreciate while the currency in a country with a lower inflation rate appreciates,” the CZI said.

“However, despite a very high inflation rate period, going as high as 837.5% in July, 2020, the official exchange rate remained firm to the USD, hence concerns about overvaluation.”

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