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Breaking prices jump 70% in Zimbabwe as the economic crisis escalates

  • Zimbabwe is coming down in economic crisis as the fall-out of Ukraine invasion, along with a plummeting local currency and government interventions push prices higher.
  • The price of bread was increased by 70% in one week.
  • Official inflation is already above 130% – but real inflation may be double.

Zimbabweans have seen the price of bread rise by 70% this week, which in addition to more fuel price increases accelerates a decline in hyperinflation and an economic crisis.

This week, the bread price rose from $ 1 to $ 1.70 (~ R26) at some stores, in part due to the knock-on effects of wheat prices trading near record highs. Prices are skyrocketing on the back of supply shortage fears, amid falling exports from Ukraine and Russia, which account for more than a third of global wheat exports.

But the price of bread also increased in response to new measures taken by the government to promote the use of the rapidly falling Zimbabwean dollar. Purchases in foreign currencies, which now have to be taxed in the exchange unit, are becoming relatively more expensive. Zimbabwe imports wheat and grain.

Meanwhile, gasoline prices rose from $ 1.68 to $ 1.73 (~ R26.60) on Tuesday, and diesel from $ 1.71 to $ 1.76 (~ R27.08), respectively.

This means that Zimbabwe now has the most expensive fuel in the southern African region, next to Malawi, says Chiedza Madzima, head of operational risk at Fitch Solutions.

Madzima said the region was hit by rising refined fuel prices because it is heavily dependent on fuel imports and exposed to global oil price fluctuations. Restrictions on supply chains due to the invasion of Ukraine exacerbate the situation for the region, especially for countries with land such as Zimbabwe.

High fuel prices mean more expensive transportation costs for almost all products, which ultimately results in price increases for many goods. This will have a painful outcome in Zimbabwe, where increased inflation will result in hyper-inflation.

According to Zimstats, consumer inflation in May reached 131.7%. However, most economists believe that this is underestimated.

Zimbabwe’s main opposition party Citizens Coalition for Change (CCC) says the country has the highest inflation rate in the world with 256%, while about 49% of the population lives in extreme poverty.

In the past few weeks, electricity tariffs have also gone up, while the devaluation of the Zimbabwe dollar has also further exacerbated the situation.

Zimbabwe is already struggling with power outages, cash shortages and unavailability of crucial medicines in hospitals. Business leaders, predicting further tightening of the economic environment, have begun to save money.

When the Zimbabwean economy stagnates, there are heightened calls for the government to abandon the Zim dollar and adopt the US dollar.

However, Finance Minister Mthuli Ncube said on Tuesday that full dollarization would result in “disastrous” effects for the economy, including negative balances in the banking sector and loss of competitiveness for the manufacturing sector.

Breaking prices jump 70% in Zimbabwe as the economic crisis escalates

Source link Breaking prices jump 70% in Zimbabwe as the economic crisis escalates

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