• Inflation increased in March 2026, with the ZWG month-on-month inflation rate rising to 0.5% from 0.1% in February, driven by transport and food costs
• The transport division was the primary driver of inflation, reflecting ZERA's two fuel price increases in March, pushing diesel to US$2.05/litre and petrol to US$2.17/litre
• The Monetary Policy Committee projects April and May inflation to rise further before normalizing in June, contingent on global oil prices

Harare- Zimbabwe’s inflation increased in March, both in USD and ZiG terms according to the latest data released by Zimstat, the country’s statistics agency.

The ZWG month-on-month inflation rate for March 2026 was 0.5%, up from 0.1% in February, an increase of 0.4 percentage points and a fivefold acceleration in the monthly price change in a single period. The ZWG annual rate, the year-on-year measure that compares March 2026 prices to March 2025 prices rose to 4.4% from 3.8% in February, an increase of 0.6 percentage points.

Both figures remain within the single-digit range that the RBZ has targeted and that the MPC confirmed would be maintained throughout 2026 despite the near-term level shift. The key inflation driver for the month was the transport division, followed by food and non-alcoholic beverages.

The USD inflation data for the same period tells a parallel and equally important story. The USD month-on-month inflation rate for March 2026 was 0.5%, up from 0.1% in February, the identical movement to the ZWG month-on-month rate. The USD annual rate rose to 1.3% from 0.9%, with the same two divisions, food and non-alcoholic beverages and transport, identified as the primary contributors.

The convergence of ZWG and USD month-on-month rates at exactly 0.5% is the most analytically significant observation in the March data release, and it carries a specific and important meaning, the price shock registered in March is a real economy price shock, not a currency-driven inflation event.

When ZWG and USD prices move at the same monthly rate, the exchange rate is not the variable driving the change. Fuel costs, transport costs, and food distribution costs rose in real terms in March 2026, and both currency baskets registered that rise identically.

The identification of transport as the primary driver of the March ZWG CPI increase is not a statistical footnote, but the direct and measurable footprint of ZERA's two fuel price increases in March 2026, which pushed diesel to US$2.05 per litre and petrol blend to US$2.17 per litre, representing increases of 15.8% and 26.9% respectively from the start of the month.

Transport costs rise immediately when fuel prices rise because every vehicle operating in Zimbabwe's formal and informal economy passes the fuel cost increase through to fares and freight charges with minimal delay. Commuter omnibus operators raised fares within days of the ZERA announcement. Long-distance bus operators followed. Freight and logistics companies adjusted their fuel surcharges.

The March CPI transport division reading is the first and most immediate layer of the fuel price pass-through, registering within the same calendar period as the price increase itself.

The appearance of food and non-alcoholic beverages as the second driver in both the ZWG and USD baskets is the early signal of the second-round pass-through that the MPC specifically warned about. Food prices do not typically respond to fuel price increases in the same month the fuel price changes. They respond in the following weeks and months, as the higher transport costs of moving agricultural produce, processed food, and beverages from production points to retail shelves and wholesale markets are incorporated into supplier pricing.

The fact that food and non-alcoholic beverages already appears as a secondary driver in the March data suggests that the price pass-through from the two fuel increases earlier in March was sufficiently large and sufficiently rapid that some food pricing adjustment had already begun before the end of the month. This is consistent with the MPC's assessment that second-round effects through adverse inflation expectations would require an appropriate monetary policy response, and it supports the MPC's projection that April and May will carry further inflation pressure as the food price pass-through works through the full distribution and retail chain.

While the month-on-month rates converged identically at 0.5%, the annual rates tell a structurally different story that reflects the fundamental difference between the ZWG and USD economies operating within the same geographic boundary. ZWG annual inflation at 4.4% is significantly higher than USD annual inflation at 1.3%, a gap of 3.1 percentage points that reflects the accumulated price level difference between the ZiG-denominated and the dollar-denominated economies over the preceding twelve months.

This gap is a measure of the residual inflation differential between the two currencies over the past year, and it persists despite the near-identical monthly movements in March because the ZWG was carrying a higher prior-year price level base from the earlier inflation episodes that preceded the disinflation of the past twelve months.

The 1.3% USD annual rate is, by any international standard, a benign inflation outcome for a dollarised or partially dollarised economy, reflecting that the dollar-denominated segment of Zimbabwe's economy has been effectively insulated from the worst of the currency-driven inflation of prior periods. The 4.4% ZWG annual rate, while equally benign by Zimbabwe's historical standards and below virtually every prior annual reading in the ZiG's short existence, reflects that the local currency basket is still carrying some residual price pressure from its own trajectory.

The practical implication of the 3.1 percentage point annual rate gap is for businesses and households operating across both currency systems. Entities that price in ZWG and cost in USD face a structural margin squeeze when USD cost inflation at 1.3% annually is accompanied by ZWG revenue inflation at 4.4% annually but the ZWG parallel market premium of approximately 30% means that ZWG revenues convert to significantly fewer dollars than the official interbank rate implies.

The annual inflation differential is not large enough on its own to drive meaningful business decision-making, but combined with the parallel market premium and the liquidity constraints on ZWG-to-USD conversion, it compounds the operating difficulty of the formal sector businesses that are required to accept ZWG under the government's mandatory payment framework while simultaneously facing USD-denominated costs for imports, fuel, and debt service.

The March data establishes the baseline for the April and May inflation readings that the MPC has projected will show further monthly increases. The month-on-month rate of 0.5% in March is not the peak. It is the opening movement. April's reading will capture the full monthly impact of the fuel prices that took effect mid-March and were therefore only partially captured in the March basket, the food price adjustments that were beginning in March and will be more fully reflected in April's retail surveys, and any second-order pricing decisions by manufacturers, service providers, and retailers who observed March's price increases and have incorporated the higher cost environment into their own pricing for the following months.

May's reading will add any wage adjustments triggered by the cost of living increases and any further fuel-related pricing decisions if ZERA conducts another review before the end of May. The MPC's projection of a return to steady-state levels from June is contingent on the global oil price environment cooperating, specifically, on Brent crude retreating from the levels above US$100 per barrel that followed Operation Epic Fury, the US-Israel strikes on Iran, and the disruption to the Strait of Hormuz.

If oil prices remain elevated into June, the steady-state return the MPC projects may be delayed, and the three-month inflation pressure window could extend.

For businesses and households, transport costs are elevated and will remain elevated until ZERA reduces prices, which requires global crude to fall. Food costs are beginning to rise and will continue rising through the supply chain adjustment period. The annual ZWG rate at 4.4% remains well within the single-digit range, meaning the long-term disinflation achievement is intact. The monthly rate at 0.5% means that March alone produced more monthly price movement than the preceding two months combined, and April and May are projected to add further pressure before June's normalisation.

 The April and May data will determine whether the return to steady state arrives on the schedule the MPC has committed to, or whether the external oil price environment forces a revision.

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