‘Good news on prices of goods’…Mangudya says they are stabilising, and will start to fall soon   

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Blessings Mashaya

SENIOR STAFF WRITER
mashayab@dailynews.co.zw



THE prices of basic consumer goods should start to come down in the coming months following the recent introduction of the foreign currency auction system and other measures aimed at stabilising the country’s economy, the governor of the Reserve Bank of Zimbabwe (RBZ) John Mangudya, pictured, has said.
Addressing a virtual meeting yesterday that was organised by the Daily News to discuss the mid-term budget statement that was made by Finance minister Mthuli Ncube last week, Mangudya said all indications were that prices in the country were levelling.
“We do believe as a bank (RBZ) that we have reached a plateau in terms of price instability and in terms of exchange rate instability and, therefore, what the budget does, is to further reinforce those positions.
“The combination of a tight fiscal regime, together with a tight money supply and … the auction system of foreign currency, have seen these … measures being pursued by the government to ensure that the country does not go through a process of hyper-inflation.
“We are quite happy with what the minister of Finance presented on Thursday,” the update Mangudya told participants in the virtual Daily News meeting.
He emphasised that he expected the prices of goods and services in the country to remain stable as the gap between the official exchange rate and the black market rate continued to narrow.
This comes as the Zim dollar is currently trading at about 69 to the much-coveted United States dollar on the official market, while black market rates have also lately been coming down since the launch of the auction system — which enters its fifth week of trading today.
Yesterday, black market rates were averaging $85 to the greenback, with many bulk buyers said to have retreated to the foreign currency auction system.
“We are happy with where we are. We think we are on course to achieve price stability. We are also on course to achieve foreign currency exchange rate stability.
“The … market rate of exchange measured by the auction is now narrow, which is what we always expected as we said last time we cannot eliminate the parallel market, but it is about the gap that is between the two,” Mangudya said further.
“You find that the parallel market exchange rate is between $75 and $90, whilst the market rate of exchange is $68,88. That is telling you they are narrowing.
“The way forward is the sustainability of the auction. How do we sustain it to ensure that we keep on putting resources into the auction system?” he added.
This comes as Zimbabwe is experiencing its worst economic crisis in a decade, which has stirred anger and restlessness among long-suffering ordinary people.
In addition, the country is also suffering from the double whammy of the negative effects of the global coronavirus pandemic and the severe regional drought which has left more than half of the population facing starvation.
It also comes as the Zimbabwe dollar — which Ncube prematurely and ill-advisedly re-introduced last year — has been losing its value worryingly against major currencies, with many businesses and shops now preferring to be paid for their goods and services through the coveted US dollar.
However, the buoyant Mangudya asserted yesterday that the country had adequate foreign currency to meet all of Zimbabwe’s demands and obligations.
“Many people will be asking where the money is coming from. It’s coming from retention, liquidations, NGOs who are selling, exporters who liquidate their foreign currency, the mining sector and the tobacco season.
“At least, for now, we are comfortable that resources are being used in a manner that is efficient … Overall, we are on course to ensure that there is price stability.
“If the minister (Ncube) had put a supplementary budget, it means that it was going to add more money in the economy, but he said let’s use what is available. So, we are trying to live within our means,” Mangudya also said.
He said industry and commerce now needed to price their goods in line with the official exchange rate.
“Business must price their products according to market rate. We are in are in control of money supply.
“We urge the business community to ensure that they also use the market rate of exchange to price their products.
“Some have complied, others are still lagging behind. I prefer self-compliance to forced compliance,” Mangudya said.
“We now have more forex deposits than the local deposits in terms of quantity. Sixty four percent of the money supply in the country is foreign currency, 36 percent is local currency.
“In terms of loans, 58 percent is local loans, 42 percent are foreign loans denominated in foreign currency.
“In terms of these statistics, it tells you that the money supply in this economy is not significant enough to push the rate,” Mangudya added.
Also speaking at the Daily News webinar, the permanent secretary of the Ministry of Finance, George Guvamatanga, warned retailers not to use black market rates to charge their products.
“After four auctions, we expect the retail sector to respond by applying the auction rate in their pricing mechanism.
“We are concerned with players who are coming to the auction system, but continue to use other exchange rates in their pricing.
“Other concerns we want to raise with the retail sector are that we continue to see other products rise in US dollars. There is no justification for that,” Guvamatanga warned.
He also said that the government would not hesitate to delist retailers from participating in the auction system if they continued to price their goods using parallel market rates.

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