Zimbabwe inflation rises sharply, spurred by food and housing

Zimbabwe’s inflation rate rose sharply in January in both U.S. dollar and local currency terms, spurred by food and housing prices.

In dollar terms inflation accelerated to 14.6% year on year after rising by 2.5% in December. On a local currency basis inflation rose to 10.5% month on month in January compared to an increase of 3.7% in December, statistics agency data showed on Tuesday.

Independent economist Prosper Chitambara said last year’s severe regional drought and additional taxes introduced this month had likely contributed to the inflation increase.

“It could be the new taxes that have taken effect this month. The huge cost is passed on to consumers. Before the next harvest season we are likely to see an upward trend of inflation as drought continues to exert inflationary pressures,” Chitambara said.

In his latest budget Finance Minister Mthuli Ncube introduced a 0.5% tax on fast food and a 10% tax on all sports betting proceeds, which took effect this month.

Another independent economist, Tony Hawkins, said U.S. dollar inflation had been “grossly understated” and authorities in the Southern African country were playing catch-up.

Zimbabwe launched a new gold-backed currency in April last year, but it was sharply devalued in September and foreign currencies like the U.S. dollar are still used for most local transactions.

Since the devaluation, the Zimbabwe Gold currency has fallen further. It was trading around 26.3 to the dollar on Tuesday, according to the central bank’s website.