Inflation in Zimbabwe soared last month to its highest level since 2008, official data showed Tuesday, after a severe dollar shortage led to a surge in prices of food, drinks and clothes.
The annual inflation rate shot up to 20.85 percent in October, statistics agency Zimstat said, from 5.39 percent in September, after the dollar shortage led to a collapse in Zimbabwe's parallel “bond note” currency, triggering sharp price hikes in many goods and services.
That has sent a ripple of fear among citizens still traumatized by the hyperinflation era, which ended when Zimbabwe was forced to abandon its currency and adopt the U.S. dollar in 2009.
Some businesses in Zimbabwe are now demanding cash in U.S. dollars only and have raised prices by more than three times for the majority of Zimbabweans who pay for their goods using the bond note, mobile money or bank cards.
On a monthly basis, prices jumped by 16.44 percent in October from 0.92 percent in September, Zimstat said.
"This was expected after the jump in prices we saw last month but it's more than what I had forecast," said Tony Hawkins, a professor of business studies at the University of Zimbabwe.
"Authorities will probably say it’s a one-off spike, but how many people are going to believe that? It now makes a mockery of the official inflation forecast of 5 percent next year."
Prices of basic goods like meat, cooking oil and flour rose when the value of the bond note and electronic dollars collapsed on the parallel market last month, leading to panic buying by consumers.
Zimstat stopped publishing official inflation data in September 2008 when it reached 236 million percent, but the International Monetary Fund put the figure at 500 billion percent. The statistics agency resumed running inflation figures in February 2009.
Finance Minister Mthuli Ncube said on Oct. 2 the budget deficit, which is expected to reach double digits this year, was fueling inflationary pressures and could hobble the economy.
The economic crisis is a major challenge for President Emmerson Mnangagwa, who won a disputed vote on July 30 in the first election in the southern African nation since Robert Mugabe was removed by the army a year ago after nearly four decades in power.
Teachers unions last week petitioned the government to pay them in U.S. dollars or increase their salaries, saying the cost of living had increased beyond their wages.