According to American economist Professor Steve Hanke, Zimbabwe currently holds the highest inflation rate in the world. Hanke asserts that as of August 10, 2023, Zimbabwe’s inflation stood at 685% per year.
Hanke’s measurements consistently exceed the official rates provided by authorities, which he alleges are manipulated. He said:
#ZIMWatch: As of August 10th, I accurately measure Zimbabwe’s inflation at 685%/yr. That’s the WORLD’S HIGHEST INFLATION RATE.
In July, the Zimbabwe National Statistics Agency (ZIMSTAT) reported an annual inflation rate of 101.3% for July 2023, down from 175.8% in June 2023.
Hanke previously claimed a measurement of 1298% per year for Zimbabwe’s inflation in June, which was over 15 times higher than ZIMSTAT’s official rate of 86.5% per year announced in May. He suggested that Zimbabwe was undergoing its third hyperinflation episode in 15 years.
ZIMSTAT also indicated that the month-on-month inflation for July saw a significant decrease of 89.8 percentage points, reaching negative territory at -15.3% compared to June’s 74.5%. ZIMSTAT calculates inflation using a weighted average of items priced in Zimbabwean dollars and United States dollars.
In May 2023, ZIMSTAT reported an increase in month-on-month inflation to 15.7%, surging by 13.3 percentage points from April’s 2.4%. Year-on-year inflation rose to 86.5% in May, up from 75.6% in April, according to ZIMSTAT’s data.
The disparity between Steve Hanke’s inflation figures and those released by the Zimbabwean government may arise from their differing measurement methodologies. Hanke focuses on measuring inflation separately for the Zimbabwean dollar and the US dollar, while the government employs a method called Blended inflation. Blended inflation takes into account both foreign and domestic currencies in circulation.
Hanke’s approach of separately measuring the inflation rates for each currency may capture fluctuations and distortions more accurately, especially considering Zimbabwe’s complex monetary landscape. On the other hand, the government’s use of Blended inflation provides a comprehensive view by considering the combined impact of both currencies on the overall inflation rate. However, this method can mask the impact of inflation on specific sectors of the economy, leading to controversy.
Former Finance Minister Tendai Biti early this year challenged the current Minister Professor Mthuli Ncube to explain the use of blended inflation, calling it “pure, undiluted heresy.” He argued:
In economics, inflation is a measurement of the rise in prices and only one currency is used, whether USD or RTGS or local currency, and you cannot mix currencies.
Biti said Ncube should appear before the esteemed House to provide a detailed explanation of the origin of the currency mixing that comprises RTGS and US dollars.