Zimbabwe central bank revises year-end inflation forecast upwards as currency weakens

PUBLISHED: Mon, 04 Oct 2021 15:35:34 GMT
Nelson Banya
Reuters
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People walk past the Reserve Bank of Zimbabwe building in Harare, Zimbabwe, February 25, 2019. REUTERS/Philimon Bulawayo

HARARE, Oct 4 (Reuters) – Zimbabwe’s annual inflation rate could end the year between 35% and 53%, up from an earlier estimate of 25% to 35%, the central bank said in a statement shared with reporters on Monday, as the local currency has dropped sharply on the black market.

Policymakers in the southern African country still haunted by memories of hyperinflation and currency collapses had initially wanted to bring inflation to below 10% by year-end but have revised that target higher twice now.

Inflation fell steeply in the first half of the year, from around 363% year on year in January to 56% in July, before stabilising above 50% in August and September.

“Developments on the parallel market for foreign exchange are likely to exert further inflationary pressures in the economy,” the central bank’s governor, John Mangudya, said in the statement dated Sept. 27.

Read more: Zimbabwe prices spiral after businesses told to stop pricing in dollars

“In view of recent developments, annual inflation is likely to end the year between 35 percent to 53 percent, up from the revised year-end targets of between 25 percent and 35 percent.”

On the black market, the Zimbabwe dollar has weakened from around 130 to the U.S. dollar in April to 170 currently for electronic transactions.

Over that time the official rate has gone from about 84 to 87 to the U.S. currency.

Much of Zimbabwe’s economy relies on the black market to source scarce foreign currency, despite the central bank insisting the economy is generating enough dollars to meet demand.

Finance Minister Mthuli Ncube said in July that gross domestic product was expected to grow 7.8% this year after two years of recession, helped by higher commodity prices and an improved crop harvest.

(Reporting by Nelson Banya Editing by Alexander Winning, Kirsten Donovan)

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