LONG-SUFFERING Zimbabweans can look forward to a further improvement in their lives and more stable prices of basic goods, on the back of an anticipated bumper agricultural season this year, the governor of the Reserve Bank, John Mangudya, has said.
Addressing a well-supported Daily News webinar yesterday, which looked at the central bank’s latest monetary policy statement, Mangudya also said the good agricultural season would see the government saving significant sums of foreign currency that might have been used for imports — which resources would be channelled to social development.
This comes as prices of some basic goods — among them mealie meal, bread, beef and cooking oil — have been ticking up since the re-introduction of a hard Covid-19 lockdown in January, which disrupted supply chains anew.
Until this, most prices of basic goods had remained relatively stable, after the government introduced a foreign currency auction system and other fiscal measures last year.
“We are banking on a favourable agriculture season to contain food prices. We, therefore, anticipate increased food production due to the favourable agriculture season, which will support exports, reduce imports and ease pressure on the fiscus.
“We also expect inflation to fall because of the favourable agriculture season. Our food inflation is mainly because of imported inflation. We have been importing maize, wheat and crude soya oil, whose prices have been going up.
“In Zimbabwe, we have imported inflation from outside the country which we cannot control. So, when we grow more food we expect the price of maize and wheat products, as well as cooking oil to stabilise,” Mangudya said.
This comes as the government has pinned the country’s economic revival on agriculture, in the process setting for itself an ambitious target of achieving a US$8,2 billion agriculture economy by 2025.
With improved output from agriculture, coupled with the easier availability of foreign currency, Mangudya said the manufacturing sector was also set to recover since it drew 70 percent of its raw materials from the agricultural sector.
In addition, he said, the RBZ was working hard to ensure that banks and other participants in the country’s foreign exchange system complied with auction rules — to curb potential abuses of the foreign exchange auction, which could drive prices up.
“On this note, we have seen that there is a new spirit of non-compliance creeping in and slipping through the hands of banks, where some shelf companies are being formed so that they come to the foreign currency auctions to get foreign currency.
“We have seen that in this economy, foreign currency is not always used for transacting purposes, but as a store of value.
“It is precisely because of this point that we are calling upon all banks to ensure that they do customer due diligence and customer profiling,” Mangudya said.
“Some people are going to the extent of selling the proceeds they would have received in foreign currency to the black market at $100 and coming back to the auction, bidding at $82 to $85 — and that is wrong.
“There are people, companies and entities that have the propensity to abuse the auction system. We think that we should be a normal economy where we do everything above board,” he also said.
“Our Financial Intelligence Unit (FIU) has enhanced its monitoring and surveillance to make sure that those who are misbehaving are brought to book.
“We are also refining the compliance regulations, as well as the fines and our methods in order to curtail the mischief.
“We are also putting in place a statutory instrument to ensure that the fines are increased, so that we hit the pockets of those who misbehave and that the FIU is improved. We also have no qualms in freezing the accounts of offending parties,” Mangudya said further.
The permanent secretary of the ministry of Finance, George Guvamatanga, also said the government was increasingly getting impatient with the indiscipline that was currently obtaining in the local market.
“Our fear is that the indiscipline will lead to market failure, as we have observed in the mobile money market. With the deterioration of discipline in the market, we will be forced to intervene as government.
“The wanton price increases in the pharmaceutical sector and the hardware sector, where they are using a parallel exchange rate of $120 per US dollar when they have access to foreign currency via the auction system is unacceptable.
“We may soon have to legislate to force compliance,” Guvamatanga warned.
All this comes after the government also recently asserted that the Zimbabwe dollar, and not the American greenback, would remain as the country’s main currency — as authorities strive to revive the economy and further improve the lives of long-suffering citizens.
Speaking at a well-attended Daily News post-budget breakfast meeting in Harare late last year, Finance minister Mthuli Ncube said what had happened during the era of the government of national unity (GNU), when the US dollar became the main currency in the country, had been a huge mistake that was “never to be repeated”.
“One of the biggest mistakes we have made before was to make the US dollar our primary currency. We should not repeat that mistake.
“If you recall, we ran budget deficits throughout the official US dollar period. We ran down our industries in terms of de-industrialisation.
“In fact, we had to introduce a Statutory Instrument … when we tried to protect our industries from imports because the currency was hurting competitiveness?
“Hence, we sought administrative controls to bring back competitiveness. That is not the competitiveness we want,” Ncube emphasised.
“Competitiveness comes from your own currency. So, we have to protect and promote it. We are going through a transition, and so don’t worry about the fact that you are allowed to use other currencies,” he added.
This also comes after the government recently unveiled a new economic blueprint, the National Development Strategy (NDS) — which authorities say will lead to economic development in the country and also further improve the lives of Zimbabweans.
The NDS replaced the Transitional Stabilisation Programme (TSP) which concluded at the end of last year.