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Introduction Inflation can be described as a tendency for the general price level to increase over a given lta hrefhttpwwwntsearchcomsearchphpqtimev56gttimeltagt period It can also be viewed as a case where too much lta hrefhttpwwwntsearchcomsearchphpqmoneyv56gtmoneyltagt is chasing few goods Inflation is usually measured by the Consumer Price Index CPI where a representative basket of consumer goods is analysed for changes in the price level over a defined lta hrefhttpwwwntsearchcomsearchphpqtimev56gttimeltagt frame Generally inflation results from demand pull cost push and imported inflation Demand pull arises due to supply side bottlenecks which will be outweighed by increased demand Cost push inflation results when manufacturers and producers of goods and services pass the increases in the costs of production to their customers and this is reflected in the price increases Imported inflation results from increased costs in the acquisition of forex and this will be passed to the customers as higher price Causes of Inflation in Zimbabwe since 1999 Rise in the international oil prices The rise in the oil prices led to general increase in prices of most lta hrefhttpwwwntsearchcomsearchphpqcommoditiesv56gtcommoditiesltagt in the country as fuel is a major input in most manufacturing and transportation sectors The rise in the oil prices occurred in the third and fourth quarter of 1999 Zimbabwe does produce oil so it depended on imports so an increase in the price on the international market as result of OPEC cartel agreements will drastically increase prices of most goods and this is a classic example of imported inflation Fiscal deficits Budget deficits have been increasing more rapidly since 1997 after payment of the war-veterans gratuities which were not budgeted for in the national budget This was followed by the entry into the DRC war which was estimated to cost billions of dollars for the two year stay The effect of high budget deficits as well as fiscal expansion resulted in debt-trap because of higher interest payments This could lead to lta
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