Zimbabwe’s annual rate of inflation for the month of May 2020 rose 785.55% to trail only Venezuela, with an annual inflation rate of 2312% for the same period.

The country’s local currency – the Zimbabwe dollar (ZW) – which was only re-introduced last June has depreciated significantly against the United States dollar as speculation by economic agents and indiscipline by the country’s fiscal and monetary authorities have weighed on the currency.

Since the establishment of the interbank foreign currency market last February, parallel market rates have remained ahead of the official rate.

While the interbank rate has remained stable at 25 to the United States dollar, parallel market rates are circuling around 70 to the US dollar.

The currency depreciation has only served to exacerbate the inflation situation in the country.

According to official figures from the Zimbabwe National Statistical Agency (ZimStat), the year on year inflation rate (annual percentage change) for the month of May as measured by all items stood at 785.55%

The Consumer Price Index (CPI) for the month ending May 2020 stood at 1,097.65 compared to 953.36 in April 2020 and 123.95 in May 2019.

The month on month inflation rate in May 2020 was 15.13% shedding 2.51 percentage points on the April rate of 17.64%.

Observers have claimed that one of the main factors driving inflation was money printing by the central bank – the Reserve Bank of Zimbabwe (RBZ).

But the apex bank came out this week saying reserve money supply was ‘in line with set targets’.

“Growth in reserve money over the first quarter of 2020 was well within the Monetary Targeting Framework set by the Bank’s Monetary Policy Committee (MPC).

“The MPC set a limit of 15% on reserve money growth, consistent with a monthly inflation target of 5%,” said the RBZ.

“Reserve money was ZW$13.39 billion as at 4th of June 2020, a decline of ZW$437.66 million, from ZW$13.82 billion recorded in the week ending 29th of May 2020.

“The decrease in reserve money over the week was reflected in declines of ZW$435.60 million and ZW$65.78 million in RTGS balances and other deposits, respectively.

“Partially offsetting these declines were increases of ZW$42.25 million and ZW$21.46 million in required reserves and currency in circulation, respectively.”