Zim swings back into inflation as tobacco sales open

Harare – Zimbabwe has swung back into inflation zone, statistics from the Zimbabwe Statistics Agency (Zimstats) showed on Wednesday, as the 2017 tobacco marketing season opened at the country’s auction floors.

Early trade was however disrupted after the electronic marketing platform failed to go live. This forced traders to resort to the old manual system, with the opening price set at around $4.50 per kilogram.

Finance Minister Patrick Chinamasa has said a good agriculture season – boosted by an expected rebound in maize and tobacco crops – will spur Zimbabwe’s economy to a revised 3.2% economic growth this year.

However, there have been some worries over the quality of the tobacco crop expected this year although Agriculture Minister Joseph Made said on Wednesday that the quality of this year’s tobacco leaf has improved.

Tobacco is a major export earner for Zimbabwe and it racked in nearly $900m in 2016 after the auctioning and marketing of as much as 164.5 million kilograms of the golden leaf.

"We have not yet consolidated sales volumes figures for the day. Our electronic trading platform experienced problems so we had to resort back to the old system of trading," an official at the Tobacco Industry and Marketing Board said by phone on Wednesday evening.

The southern African country is expecting some respite from tobacco sales this month to offset crippling forex shortages in the economy that have resulted in an increase in goods and commodities.

Zimstats confirmed this on Wednesday, saying prices have been on the increase.

This has put Zimbabwe back into inflation following more than two years of deflation blamed on price correction and liquidity shortages, according to different assessments by economists.

For the month of February, the year-on-year (y/y) inflation rate gained 0.71 percentage points to close the month at 0.06% against -0.65%.

Government estimates put Zimbabwe’s inflation at just above 1% by the end of this year. On a month-on-month basis, the inflation rate for February gained 0.38 percentage points, reflecting continuing price increase pressures.

“The CPI for the month ending February 2017 stood at 96.98 compared to 96.39 in January 2017 and 96.92 in February 2016. Prices as measured by the all items CPI increased at an average rate of 0.61% from January 2017 to February 2017,” Zimstats said.

The y/y food and non-alcoholic beverages inflation rate, which Zimstats said was “prone to transitory shocks”, stood at 1.29% while the non-food inflation rate was -0.51%.

Zimbabwe abandoned its own currency in 2009 after record hyper-inflation ravaged the economy, leading to empty shop shelves. President Robert Mugabe’s government has however now introduced a local bond note currency to counter bank note shortages at the banks.

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