Zimbabwe inflation surges sharply in January amid rising food and housing costs

ZIMSPHERE

HARARE – Zimbabwe’s inflation rate escalated significantly in January, with sharp increases recorded in both U.S. dollar and local currency terms, primarily driven by spikes in food and housing prices.

Image: Cynthia R Matonhodze/Bloomberg

In U.S. dollar terms, year-on-year inflation jumped to 14.6% in January, up from 2.5% in December. This surge was largely attributed to rising prices for food and non-alcoholic beverages. Meanwhile, local currency inflation also marked a steeper climb, surging to 10.5% month-on-month in January, compared to a 3.7% increase in December. Rent and utility costs registered the highest rate of price increases, closely followed by food, according to data released by the national statistics agency on Tuesday.  

Independent economist Prosper Chitambara attributed the inflation spike to a combination of last year’s severe regional drought and the impact of newly introduced taxes.  

“It could be the new taxes that have taken effect this month. The huge cost is passed on to consumers. Before the next harvest season, we are likely to see an upward trend of inflation as drought continues to exert inflationary pressures,” Chitambara explained.  

The recent tax measures were part of Finance Minister Mthuli Ncube’s latest budget, which introduced a 0.5% tax on fast food and a 10% tax on all sports betting proceeds. These taxes came into effect this month and are believed to have exacerbated inflationary pressures.  

Another independent economist, Tony Hawkins, observed that U.S. dollar inflation might have been underestimated in previous months, saying, U.S. dollar inflation had been “grossly understated,” and authorities in the Southern African country were playing catch-up.

Zimbabwe’s monetary system has faced significant fluctuations in recent years. 

The government introduced a gold-backed currency in April 2022 in a bid to stabilize the economy, but the currency suffered sharp devaluation by September. 

Despite these efforts, foreign currencies like the U.S. dollar remain dominant for most local transactions.  

On Tuesday, the Zimbabwean dollar was trading at approximately 26.3 to the U.S. dollar, according to the central bank's website.  

(with reporting from Reuters)