Things fall apart as Zim$ crashes l Black market runs amok l Prices of goods skyrocket l Wages further eroded

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THERE are fresh fears in the country — amid the continuing plunge of the Zimbabwe dollar on the black market and the ever rising prices of basic goods — that things could deteriorate to the horror levels of a decade ago, when the local economy imploded, causing immense pain to citizens, the Daily News reports.
This comes as under-pressure Finance minister Mthuli Ncube, pictured, all but admitted yesterday that his economic measures are not working — saying that the rickety Zimbabwe dollar which he rashly re-introduced last year was causing massive problems for the country, including the current sky-high inflation and economic turmoil.
The local currency was trading at up to 45 to the American dollar on the black market yesterday, amid fears that it could plunge further in the coming days, after Ncube announced that he would set up a currency stabilisation task force and also introduce a managed floating rate system — even though authorities don’t appear to have the tools to achieve this.
In addition, and following steep rises in the prices of goods and services in the country this week, some shops in Harare said last night that they were making preparations to effect even higher prices, in anticipation of a further fall in the value of the hapless Zim dollar.
Since last year when the local currency was prematurely re-introduced into the market, it has been proven — and Ncube himself openly admitted this yesterday — that the weakness and volatility of the Zim dollar is largely behind the country’s skyrocketing prices, high inflation and economic turmoil.
Yesterday, a wide cross-section of Zimbabweans — including businesspeople, ordinary consumers and economists — warned in interviews with the Daily News that the move to float, but still “manage” the local currency was likely to have serious consequences.
The advocacy and campaigns adviser for the National Consumer Rights Association (Nacora) Effiel Ncube, said floating the wobbly Zim dollar was “destined to fail” as the country was facing much deeper problems which went beyond monetary policies.
“A managed floating exchange rate system works where there is production and where there are reserves to back up the local currency.
“Zimbabwe has none of those and what we are going to see is the exchange rate shooting up, thereby resulting in an increase in the prices of basic goods and services.
“Honesty, when market forces are at work, the Zimbabwe dollar is likely to drop to 500 against the rand and other currencies because what the interbank rate has been doing is to over value the local currency,” Ncube warned.
“So far the government has not indicated where we are going to start off with the exchange rate.
“If the Zimbabwe dollar starts weak, then things are likely to go bad for us as it will never gain against other currencies.

 

“This is because we do not have enabling factors such as production … to grow the economy or a currency that can become strong,” veteran economist John Robertson weighed in.
The Zimbabwe Congress of Trade Unions (ZCTU) also warned of further erosions to wages, savings and pensions, as well as a spike in the prices of goods and services, in the wake of Ncube’s new measures.
“What the introduction of a managed floating exchange rate system means is that the cartels who have the foreign currency in Zimbabwe will decide to sell at a rate they deem fit and this can escalate to 50, 100 or even 200.
“Businesses need foreign currency in order for them to import commodities, and if the rate to purchase foreign currency goes up, the prices of basic goods will also go up.
“As we all know, this will result in the further erosion of salaries … and workers will continue suffering,” ZCTU secretary general, Japhet Moyo, told the Daily News.
“The Zimbabwe dollar has proven to be a very useless currency. Why are we still using it? Let them please take away this useless currency.
“Why can’t we revert back to using a multi-currency system or adopting the rand, given that we have close trading relations with South Africa,” he added.
On his part, forthright former Finance minister in the short-lived but stability-inducing government of national unity (GNU), Tendai Biti, said the government’s latest policy measures signalled “total failure” on the part of authorities.
“The move by Mthuli Ncube is an ill thought one. We are currently facing shortages of foreign currency and we have no productivity in Zimbabwe to support economic growth and the local dollar.
“Floating the Zimbabwe dollar will result in the exchange rate shooting up, triggering hyperinflation and price increases.
“What Mthuli has done will result in a serious devaluation of salaries. For example today people who are earning $7 000 with the current parallel market rate of 1:40 are earning around US$200.
“In just a few weeks the parallel rate will hit 1:100 and that is when it will be clear that Mthuli has failed,”Biti told the Daily News.
“The other thing that will follow is the shortage of every essential that is imported, including electricity, fuel and medication.
“If we do not have these essentials like electricity and fuel then we cannot talk of production and economic growth,” he said further.
He dismissed Ncube’s claims that Zimbabwe could not join the rand monetary zone  because the local currency was not at par with the South African rand.
“That is just an excuse by Zanu PF. That party is made up of nationalists who are proud and joining the rand takes away, in their view, that nationalism.
“So this is why they do not want to join the rand zone.
“Mthuli needs to resign and save the people from one bad policy to another. Our best bet to come out of this crisis is to re-dollerise the economy and allow the restoration of wages, savings and citizens’ buying power,” Biti added.
Yesterday, a seemingly despairing Ncube said the government was floating the plummeting Zim dollar to mitigate the savage battering that it is receiving on the parallel market.
“Zimbabwe has had no transparent and effective foreign exchange trading platform for a long time.
“Consequently, official rates have not been effectively determined, while a thriving parallel market has developed.
“To correct this anomaly, an electronic forex trading platform based on the Reuters system is being immediately put in place.
“This platform will allow foreign exchange to be traded freely amongst the banks and permit a true market exchange rate to be determined,” Ncube said.
Immediately after the announcement, the local currency plunged further against the US dollar on the thriving parallel market, where it was trading between 40 and 45 to the greenback — as panicking companies and ordinary people rushed to offload their stashes of the Zim dollar.
In June last year, Ncube rocked the local market with his sudden decision to end the general use of multiple currencies in the country — including the US dollar — without having put adequate measures in place to shore up the resuscitated Zimbabwe dollar.
And in a bid to stop the use of multiple currencies, the government also invoked Statutory Instrument 212 of 2019 to support the ban on trading in US dollars and other foreign currencies.
However, and following the government’s rushed ban of the general use of the United States dollar in the country, the much coveted greenback has come back with a bang — with many businesses and ordinary people now openly opting to charge for their goods in that currency.
Zimbabwe is in the grip of a huge economic crisis — the worst in a decade — which has seen the country continue to experience skyrocketing inflation, as well as debilitating shortages of water, power, fuel, critical medicines and foreign currency, among a myriad other challenges.

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