Zimbabwe’s inflation surges following drop in local currency

Points clés à retenir

The recent surge in inflation marks the third consecutive increase since the Zimbabwean statistics agency changed its price measurement methodology on September 28. The adjustment aimed to better reflect the prevalent use of US dollars in the economy, with the greenback accounting for around 80% of transactions. The US dollar is preferred over the Zimbabwean dollar, which has experienced extreme volatility since its reintroduction in 2019, following a 10-year hiatus after hyperinflation eroded its value. In the current year, the local unit has depreciated by 38% against the US dollar on the official market. On the streets of the capital, Harare, the depreciation is even more pronounced. Notably, between May and June of the previous year, the Zimbabwean dollar experienced an 85% decline before a shift to a more liberalized exchange rate and a government directive mandating corporate taxes to be paid exclusively in local currency contributed to a partial recovery. The economic challenges, particularly related to currency dynamics, continue to pose significant hurdles to Zimbabwe's financial stability.