Ray of hope for ordinary people … as Zimbabwe dollar, prices of basic goods remain stable
THERE is a glimmer of hope among long-suffering Zimbabweans that the stabilising cost of basic consumer goods in the country will soon lead to more prices coming down on the back of the continuing good performance of the Zimbabwe dollar against major currencies.
Consumers who spoke to the Daily News yesterday expressed relief that the country’s economic situation — although it was not yet where they would like it to be — appeared to be getting better, adding that they hoped this trend would be maintained in the coming weeks and months.
This comes as the Zimbabwe dollar continues to hold steady on the recently-introduced foreign currency auction system launched by the Reserve Bank of Zimbabwe (RBZ) to stabilise the local trading unit and bring down both inflation and the prices of goods and services.
It also comes as economists say the prices of goods could remain stable as long as authorities address other key economic issues that include production to stimulate growth.
“In the last few months, prices were increasing almost on a daily basis, and one couldn’t really budget for anything. But now, we are seeing that the prices are decreasing gradually.
“For example, a 2kg packet of sugar which was costing $121 is now $100,99. Powdered milk, which used to cost $265 now costs $241,” a Harare shopper, Albertin Matope, told the Daily News yesterday.
Another consumer, Chipo Maidza, said the current developments suggested that the country was now moving in the right direction on the economic front.
“From what I have seen so far, prices of basic commodities — including, rice, potatoes, tomatoes and cooking oil — are decreasing.
“It had become the norm that every time you go to the supermarket you would find new and increased prices. But for now, prices are either remaining the same or decreasing.
“Even the exchange rate, particularly on the black market, has stabilised since the introduction of the auction system,” Maidza also told the Daily News.
On their part, business leaders said the current price stability could lead to prices coming down overall if authorities continued to stick to their current measures.
The president of the Confederation of Zimbabwe Retailers (CZR), Denford Mutashu, said there were positive signs that there was now price stability.
“Prices have stabilised, both in US dollars and the local currency. CZR expects this stability to be enjoyed in the short to medium term, if other cost drivers remain constant.
“Accessibility of foreign currency on the auction system has indeed brought about the predictability that businesses sought for a long time.
“What is now key is collaborative support for the auction by ensuring that businesses restore foreign currency supply through exports.
“The participation by many businesses on the official foreign currency market has left parallel market dealers clutching at straws. They are finding the going tough,” Mutashu told the Daily News.
“Industry is able to access foreign currency from the auction system and the relative stability of the exchange rate for some weeks now is welcome.
“Businesses are now able to plan and to operate more predictably, with prices of goods reflective of the relative stability.
“Industry requires less than 20 percent of the foreign currency earnings of the country and consistent access is important for efficiency and high production, which increases the multiplier effects in the economy at large,” the president of the Confederation of Zimbabwe Industries (CZI), Henry Ruzvidzo, chipped in.
Ruzvidzo said price levels were a function of several variables, which had been lagging behind exchange rate movements.
However, economists said while the prospects of the continued firming of the local currency was a possibility, it was imperative for authorities to deal with the parallel market decisively.
“We have to get rid of the black market. It is still asking for more than $100 to the US dollar,” veteran economist John Robertson told the Daily News.
Addressing a recent virtual meeting of chief executive officers (CEOs), RBZ governor John Mangudya said Zimbabweans could look forward to a more stable local economy going forward.
“The RBZ’s focus is on price stability. In order to achieve this, we have come up with a two-pronged approach which is about exchange rate management and monetary supply management.
“The auction system is being sustained through domestic resource mobilisation, wherein we say 20 percent of commercial transactions are directed to go to the auction system.
“This ensures that foreign currency keeps on flowing and businesses are sustained … The exchange rate is gradually stabilising. All bids have been between $80 and $88 for the past three to four weeks.
“The average is vacillating within that ruler … and this is not far from the parallel market rate which is around $82 for cash and $90 for transfers,” Mangudya said then.
Since the launch of the auction system in June, the Zimbabwe dollar has moved from 63 to the US dollar, to the current 83,3 against the coveted greenback.
“We are not manipulating the system, we are saying bring your own bid and our role is to host the system just like we host treasury bills.
“We are providing infrastructure and the rules are there to ensure that the process is transparent and accountable.
“We are re-strategising and putting an end to a random walk. We are trying to abandon the random course and walk towards stabilising the exchange rate for prices to stabilise,” Mangudya said further.
The central bank chief has previously said prices would come down in due course, on the back of a raft of measures that authorities were introducing to stablise the economy.
“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 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 and as we said last time we cannot eliminate the parallel market, but it is about the gap between the two,” Mangudya told a virtual meeting organised by the Daily News in July.