In Zimbabwe, inflation is roaring back – The Wall Street Journal

DUBLIN – Ask any economist – hyperinflation is one of the most painful economic experiences possible. Zimbabwe grappled with a long and devastating period of hyperinflation. Back in 2008, inflation hit an annualized rate of 231,150,889% before the government stopped reporting it. Hyperinflation only ended when Zimbabwe stopped using its own currency in 2009 and switched to the US dollar for daily transactions. After over a decade of economic sanctions and tragic mismanagement, Zimbabwe is in a bad way. The country is still struggling politically and now there are fresh signs of rampant inflation. For ordinary Zimbabweans, life has been almost unliveable for decades. The wasted human potential is heart-breaking. – Felicity Duncan.In Zimbabwe, Skyrocketing Prices Evoke Painful Memories.By Bernard Mpofu and Gabriele Steinhauser.(The Wall Street Journal) Prices for some consumer goods are skyrocketing in Zimbabwe, a painful echo of the hyperinflation that ripped through the Southern African country a decade ago..___STEADY_PAYWALL___.In October, the cost of certain items—including cooking oil, alcoholic drinks and flu medication—jumped as much as 400%, as many Zimbabweans rushed to liquidate their savings and businesses struggled to pay for imports. Long fuel lines forced people to fill up their cars on the black market at three times the price. Some companies have started paying part of their staff's salaries in food, while many stores no longer accept card payments for imported goods..The sudden price increases and panic buying are the result of a worsening economic crisis that started under long-time strongman Robert Mugabe and hasn't been halted by his ouster a year ago. Disputed elections in July, followed by a brutal crackdown on opposition supporters, have complicated efforts by Mr Mugabe's successor, Emmerson Mnangagwa, to heal relations with the West, secure a much-needed bailout from the International Monetary Fund and attract investors to explore its mineral resources..The finance ministry said in October that it will run a budget deficit of 11.1% of gross domestic product this year, far above its previous 3.5% target. In September, it launched a crowdfunding campaign to help fight a deadly typhoid and cholera outbreak in the capital, Harare. It raised $14,748.24 of a $2 million goal..The current price gyrations come nine years after Zimbabwe ditched its own currency to end nearly a decade of hyperinflation, which peaked at 79.6 billion percent in November 2008 and led to the printing of now-worthless 100 trillion Zimbabwe dollar notes. Since then, the U.S. dollar has been the dominant currency, even as banks have effectively stopped dispensing cash dollars and most payments are made by card or mobile transfers..Zimbabwe now effectively runs on two types of dollars—ones that exist digitally in bank accounts or mobile money and actual cash dollars, which trade at a hefty premium..Since November 2016, the central bank has also been printing so-called bond notes, an alternative form of payment that is officially on par with the dollar, but is now trading at a rate of three to one on the black market. Getting cash dollars through bank transfers or mobile money is even more expensive, with informal currency traders in the capital Harare charging as much as $350 for a $100 bill this month.."Bond notes are fast becoming useless because everyone is either demanding U.S. dollars or increasing prices every day," said Cosmas Gatsi, a 42-year-old cellphone technician, as he waited at a supermarket outside Harare to buy cooking oil..He said he was told to buy $15 of groceries before he could join a line for a $3.90 bottle of oil, which now costs $14 on the black market. "The price difference between the supermarket and informal traders is just too much.".One reason for the price surge, some analysts said, was the Reserve Bank of Zimbabwe's Oct. 1 announcement that all local lenders would be required to offer a new type of account where individuals or businesses depositing dollars from outside Zimbabwe or in cash would be guaranteed dollar withdrawals and the ability to send money abroad quickly. The aim, the bank said, was to encourage remittances and exports.."That declaration people perceived to mean that those [other] dollars are not real dollars," said Evonia Muzondo, senior research analyst with Harare-based brokerage firm Imara Edwards Securities. "That's the first step toward devaluation.".Meanwhile, photos of crisp bond notes have circulated on social media, fueling speculation that the central bank was printing many more notes than it has publicly declared. In July, the bank said it had issued $426.9 million in bond notes and coins. It hasn't released any updated figures and didn't respond to requests for comment..Mr Mnangagwa has said he plans to reintroduce a local currency, but only once the country has sufficient foreign-currency reserves to back it. On Sunday, his office said illegal currency traders would now risk up to 10 years in prison and have their proceeds confiscated by authorities..One measure of the effective devaluation of the dollar in Zimbabwe is the price of shares in South African financial-services company Old Mutual PLC on the Harare stock exchange, which in October spiked to 8.9 times their price on the London Stock Exchange. They are now trading at 3.9 times their London price..International companies operating in Zimbabwe are struggling to adapt. In October, U.S. fast-food chain KFC closed its six restaurants there after running out of chickens.."We are selling in bond notes, yet suppliers are demanding their payment in foreign currency. This has put us in awkward position," the chain, owned by Yum Brands Inc., said in a sign posted on the door of its central Harare branch..French oil company Total SA has capped card payments at its local gas stations and says it can't guarantee fuel supplies. South Africa's Standard Bank Group Ltd. is paying half of its staff's salaries in cash, while several Zimbabwean companies have given their staff temporary raises or are handing out weekly food rations..Those without access to cash dollars have no choice but to pay higher prices. Munashe Tugwete was at a suburban Harare pharmacy this month trying to buy cold medicine. The drug, which had cost $4 in early October, was now $14, the pharmacist told him, unless the 40-year-old could pay in cash dollars.."This year, many people will die," Mr Tugwete said as he handed over his bank card. "Where will we get the dollars to buy drugs?".The pharmacist said his suppliers demand cash dollars for imported drugs.."Many think we are heartless, but if we don't charge prices that allow us to restock, we will just close shop overnight," he said. "Blame the economy, not us.".Write to Gabriele Steinhauser at gabriele.steinhauser@wsj.com

In Zimbabwe, inflation is roaring back – The Wall Street Journal

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