THE United States dollar month-on-month inflation quickened to 11,5% in January from 0,6% in the previous month, official data showed yesterday, indicating a massive increase in greenback pricing for goods and services owing to the volatile exchange rate.
While the greenback remains a stable currency, the rise in the US dollar monthly inflation rate is owing to exchange rate volatility from the Zimbabwe Gold (ZiG) currency depreciating.
Formal businesses are increasing the foreign currency prices for their goods and services to cover the losses they are making from the depreciation of the local currency.
The dollar was yesterday trading at ZiG26,33 from ZiG25,79 at the end of last year.
“The USD month-on-month inflation rate was 11,5% in January 2025, gaining 10,9 percentage points on the December 2024 rate of 0,6%. This means that prices as measured by the all items USD CPI, increased by an average of 11,5% from December 2024 to January 2025,” the Zimbabwe National Statistics Agency (ZimStat) said yesterday.
“The USD month-on-month Food and Non-Alcoholic Beverages inflation rate was 16,8% in January 2025, gaining 14,9 percentage points on the December 2024 rate of 1,9%. The December 2024 USD month-on-month non-food inflation rate was 9,1%, gaining 9,1 percentage points on the December 2024 rate of 0,0%.”
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The ZiG, launched in April last year after the collapse of the Zimbabwe dollar, has failed to hold its own against the greenback.
It depreciated by double digit levels in September last year.
ZimStat macroeconomics acting director Mable Chimhore said ZiG inflation rose by 6,8 percentage points from 3,7% in December 2024.
“The ZiG month-on-month inflation rate was 10,5% in January 2025, gaining 6,8 percentage points on the December 2024 rate of 3,7%,” she said.
“For the month of January 2025, the ZiG CPI for housing, water, electricity, gas and other fuels contributed mostly to the month-on-month change in index (inflation rate) by a magnitude of 6,3% and followed by food and non-alcoholic beverages with a magnitude of 2,4%.”
Chimhore said government spending could have a positive impact as it meant more money would be poured into various projects, which would stimulate economic growth.
However, both the Treasury and RBZ have adopted tight fiscal and monetary policies, respectively, that have deprived the market of adequate liquidity in a bid to bolster the ZiG.
Economists have warned that growth would be constrained causing the ZiG to remain volatile if the current liquidity levels in the market persist.
The authorities adopted tougher fiscal and monetary policy stances in an attempt to preserve the ZiG’s value.
“So, government spending can increase GDP (gross domestic product) — That money is used to fund various projects, programmes and services, and then, as a result, businesses and industries receive more orders and contracts, which leads to increase in production, employment and income,” Chimhore said.
“So, as people earn more from the income that they get, they spend more, creating a multiplier effect. This increases our GDP.”