Zimbabwe’s devaluation of ZiG sees return to double-digit inflation

Inflation in October rose to 37.2% from 5.8% a month earlier, the Zimbabwe National Statistics Agency said Friday.

Zimbabwe’s monthly inflation rate surged after a steep devaluation of its gold-backed currency stoked prices.

Inflation in October rose to 37.2% from 5.8% a month earlier, the Zimbabwe National Statistics Agency said Friday in an online briefing.

It’s the third consecutive month that prices have increased in the southern African nation since the introduction of the ZiG, short for Zimbabwe Gold, in early April. But the scale of the rise was much larger after the currency’s official exchange rate against the dollar was slashed.

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The ZiG was devalued by 43% on September 27 after the gap between the official and unofficial exchange rates significantly widened, in part due to dollar shortages caused by increased food imports because of a severe drought in southern Africa.

That evoked painful memories of the past, when Zimbabweans suffered hyperinflation due to government printing money to finance spending, destroying savings and prompting the central bank to infamously issue a 100 trillion Zimbabwe dollar note.

Since the ZiG devaluation, power utility Zimbabwe Electricity Supply Authority and mobile network operators have hiked tariffs in local currency terms.

Earlier this month, the government gave state workers a pay increase of $40 in local currency to cushion them from the devaluation, according to Sifiso Ndlovu, the chief executive officer of the Zimbabwe Teachers’ Association. The increment has already “lost value” as the parallel market rate has widened from the official rate, he said.

The ZiG was trading at 27.69 per dollar on the official market on Friday, according to data on the central bank’s website. It was quoted at between 40 and 50 to the dollar on the street market, according to ZimPriceCheck.com, a website which tracks official and unofficial rates.

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