New Zimbabwe CPI Weights Show ‘Reality Gap,’ Economist Says

(Bloomberg) -- Zimbabwe has had hyperinflation, deflation and rising inflation in the past decade. Now it has revised the weights and base year of its consumer price index, but Harare-based economist John Robertson is skeptical about whether the new basket reflects the reality of cost increases for embattled consumers in the country.

The new index, which was published on Monday and showed inflation accelerated for a 10th straight month to 66.8 percent in March, doesn’t appear to provide for steep fuel-price increases, nor for higher school fees and accommodation costs, Robertson said Tuesday in an emailed note to clients.

Inflation in the southern African nation peaked at 500 billion percent in 2008, according to the International Monetary Fund, prompting the government to abandon its currency in favor of the U.S. dollar. Zimbabweans are in the midst of an economic crisis as they face shortages of bread, fuel and foreign currency.

President Emmerson Mnangagwa more than doubled gasoline prices in January to try to boost government revenue. A new currency, introduced in February and known as the RTGS$, fell to 4.9 per U.S. dollar Tuesday on the black market, its weakest level in six months, according to marketwatch.co.zw, a website run by analysts in Harare. The official rate on an inter-bank market that began operating in February fell to a record low of 3.1878 per dollar.

“The reality gap that presents itself in the numbers shown suggests that this survey must have been conducted some months before recent exchange-rate instabilities and market shortages began to affect consumer behavior,” Robertson said. “If this index is to be taken seriously, the authorities responsible for its production will have to respond to any
expressed misgivings.”

Calls to contact numbers on the Zimbabwe National Statistics Agency’s website didn’t connect.

To contact the reporter on this story: Rene Vollgraaff in Johannesburg at rvollgraaff@bloomberg.net

To contact the editors responsible for this story: Gordon Bell at gbell16@bloomberg.net, Antony Sguazzin, Paul Richardson

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