Weighted Blended Inflation Rate a Headache for Accountants
"Government wants to reign in inflation from a rigged methodology and say our inflation is now below 100%" - Gift Mugano
Professional accountants have engaged the government over the move to measure inflation using a weighted average of items priced in Zimbabwean dollars and United States dollars, the “weighted blended inflation rate”.
Accountants argue the adoption of the weighted blended inflation rate has severe consequences when reporting financials.
Speaking to Business Times, Institute of Chartered Accountants of Zimbabwe CEO, William Mandisodza, said:
For now, what I can say is that we are lobbying for some alignment with the policymakers. Commenting outside those discussions will not create the right environment for ongoing discussions.
Economist Gift Mugano told the publication that blended inflation was a “rigged methodology”. Said Mugano:
The major danger here is confidence as the government is not taking responsibility by putting the right measures. It’s like it has run out of ideas. Government wants to reign in inflation from a rigged methodology and say our inflation is now below 100%.
They are not putting the right measures to deal with inflation and they are now going for rigging and I want to repeat this is pure rigging. It sends the wrong message in showing that we have failed to deal with inflation.
He argued that the way the prices are increasing in ZWL$ is different from the way the prices are increasing in US$, therefore, inflation should be calculated using the respective currency either in ZWL$ or US$ but separately. Said Mugano:
A worker that is paid in ZWL$ is facing a steep price regime whereas the one earning in US$ is enjoying price stability.
It’s not correct to say that the prices in the US have annual inflation of 92%. That is not correct because prices in hard currency have single-digit inflation. This is totally misleading and uncalled for.
In early March 2023, the Minister of Finance and Economic Development Mthuli Ncube promulgated SI 27 of 2023 which read in part, … ‘rate of inflation’ means the general increase in price levels of goods and services measured as a weighted average based on the use of Zimbabwean dollars and United States dollars over a given period of time.
Using the blended rate, the Zimbabwe National Statistics Agency (ZIMSTAT) said the year-on-year inflation for March was 87.6% and 92.3% in February.
