Zimbabwe's annual inflation rate fell to 2.5 percent in May from 2.7 percent a month earlier, the Zimbabwe National Statistics Agency (Zimstats) announced yesterday.

The country's annual inflation was unchanged at 2.7 percent since March due to price stability and the availability of basic commodities.
Zimstats director Moffat Nyoni said the month-on- month inflation rate in May 2011 was 0.1 percent, remaining unchanged on the April rate.

This means that the average rate of change in prices between April and May was 0.1 per cent.

The month-on-month food and non-alcoholic beverages inflation stood at -0.07 percent shedding off 0.59 percentage points from 0.52 recorded in April.

Year-on-year food and non-alcoholic beverages inflation prone to transitory shocks stood at 2.29 percent while non-food inflation stood at 2.60 percent.
Zimbabwe's inflation has been on a downward trend after going up in the first month of the year, peaking at 3.5 percent.

Annual inflation ended at 3.2 percent last year but increased to 3.5 percent in January before decelerating to 3 percent and 2.7 percent in February and March 2011, respectively.

An IMF report released in Washington earlier this week, however, stated that Zimbabwe may miss its 4.5 percent inflation target this year because of high fuel costs and rising wages.

"Twelve-month inflation is forecast to reach about 7 percent by December 2011 on account of higher food and fuel prices as well as wage-driven increases in prices for non-tradeables, for example rents and services," the IMF stated in the e-mailed report.

Zimbabwe broke free from record hyperinflation when it abandoned its worthless Zimbabwe dollar at the formation of the coalition government in February 2009.

The country's inflation fell into one extreme from another when the local currency was abandoned.

It had continuously spiralled out of control, reaching hyper-inflationary levels of 231 million percent recorded by the CSO in July 2008 although independent estimates indicate that it had reached sextillion (a number followed by 21 zeros) per cent by the end of 2008, which caused prices to more-than-double every day.

This marked the death of the Zimbabwe dollar, which subsequently went out of circulation, resulting in the market pricing of goods and services in foreign currencies, and inflation fell into negatives.

Prices have since stabilised and the country has been recording a stable inflation.

Currently, the country has the lowest single digit inflation in the region compared to 22 digit inflation levels thanks to the adoption of foreign multi currencies, chief of which are US dollar and South African rand.

Zimbabwe also expects to grow its economy by 9.3 per cent this year but the IMF believes the country will only achieve 5.5 percent as a result of indigenization policies in which foreign-owned companies must surrender the majority of their equity to local Zimbabweans.