Zimbabwe’s inflation surged in January, with the cost of goods and services rising by 14.6% in U.S. dollar terms and 10.5% in local currency terms, compared to the same period last year. Independent economist Prosper Chitambara attributed the increase to higher taxes and a regional drought that worsened food prices.
One of the key factors driving the rise in inflation is the introduction of new taxes in the government’s latest budget. The Finance Ministry implemented a 0.5% tax on fast food and a 10% tax on sports betting proceeds, effective this month. These measures are expected to further strain household budgets.
Zimbabwe had introduced a gold-backed currency in April 2023 in an effort to stabilize the economy, but it was sharply devalued in September. Despite the launch of the new currency, most local transactions continue to be conducted in foreign currencies, particularly the U.S. dollar.
Following the devaluation, the Zimbabwe Gold currency has continued to lose value. As of Tuesday, it was trading at around 26.3 to the U.S. dollar, according to the central bank’s website. The economic situation remains challenging for many Zimbabweans, as inflation continues to erode purchasing power.