Zimbabwe's economy was in trouble even before the pandemic, as its inflation was on the rise due to poor fiscal and monetary policies. The pandemic has only exacerbated the situation, with the world economy shutting down.

Zimbabwe started 2021 with inflation at triple digits and ended at double digits. That is something the government sees as a win. According to ZIMSTATS, the government statistics agent, inflation in December closed the year at 60.74%; inflation in December 2020 was 348.39%.

Zimbabwe's Currency Problem

The Reserve Bank of Zimbabwe (RBZ) is proud that year-on-year inflation dropped from 837.5% in July 2020 to 50.2% in August 2021. The RBZ's monetary policy committee resolved to keep the benchmark rate at 40% in August, contributing to the local currency falling.

As the currency falls, business and private citizens lose faith in it. Foreign currencies, mainly the US dollar and South African Rand, are seen as safe havens and more stable currencies to trade in.

The government of Zimbabwe trapped itself in its own political quagmire. It insists on adopting monetary and fiscal policies that are detrimental to the economy, such as insisting that the local currency stands at half the price of the black market rate. All private transactions use the black market rate.

Zimbabwe’s Inflation Numbers

In October 2021, the RBZ had to revise its year-end inflation outlook for a third time to 53%; the initial targets were between 25% and 35%. The annual consumer price inflation increased for the third straight month to 58.4% that November from 54.5% in October. Inflation ended the year at 60.74%.

The drivers of inflation are external and internal. The external factors include:

- High oil prices
- Electricity tariffs (Zimbabwe imports electricity from the region)
- The weakening of the national currency against the US dollar

The inflationary pressures have created discontent among the masses. The coming year is unlikely to provide any respite as the same inflationary pressures are still present. The RBZ estimates put the year-end inflation at 75% for 2022. Zimbabweans have little faith in the institution and expect inflation to be higher.

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