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Zimbabwe’s Economic Crisis Worsens As Inflation Increases

Jun 14, 2022

Written by Umamah Bakharia 

Zimbabwe’s economic crisis seems to be worsening.  The fall-out from the Ukraine invasion, a local currency and government interventions are all contributing to skyrocketing cost of living in Zimbabwe. With official inflation rates at 130%, the price of bread in local shops was hiked 70%  in just one week.

But when Zimbabwe’s Finance Minister Mthuli Ncube was asked how the country plans to deal with the crisis, his response was: “What crisis”?

Discussing this with Radio Islam International, analyst and journalist live from Zimbabwe, Vince Musewa says the main issue that the country faces is the multi-currency regime. 

“You have the US dollar and the Zim dollar, and what happens is people would prefer holding the US dollar because many companies have to import goods since Zimbabwe has industrialised over time,” says Musewa.

Most of the items in Zimbabwean stores are imported, therefore, the importers make use of the US dollar for the purchase of goods.

“If they are forced to price those goods in Zim dollars, they have to use a rate that takes into account the cost of bringing in the goods into the country and the replacement cost in the future,” says Musewa.

He says the fundamental issue is that Zimbabwe does not have enough US dollars to satisfy the economy, which is why there is high demand.

“The US dollar is seen as a value preservation unit and so as soon as they get a Zimbabwean dollar, they want to convert it into a US dollar so that they can preserve value,” says Musewa.

He says these factors are contributing to the high inflation including corruption, lack of investment capital and no accountability from the government.

He adds that price stability could assist in Zimbabwe’s hyperinflation.

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