POOR Zimbabweans may soon feel the pinch of the country’s economic woes even more, after business warned yesterday that it could soon be forced to start charging all goods and services in United States dollars, the Daily News reports.
The threat by big business, which underlines the growing lack of market confidence in the Zim dollar, comes as the government is moving away from the general use of the US dollar in the economy, to facilitate the sole use of the local currency.
All this is happening as the country is going through its worst economic crisis in a decade, which was further underlined this week by steep price increases all round — which included another round of higher electricity tariffs.
Now, the Confederation of Zimbabwe Industries (CZI) has warned that as more service providers charge for their goods in US dollars, its members were being cornered to start considering doing the same for their products.
“It is clear that key enablers for industry are now in United States dollars, and this includes electricity, fuel, transport and raw materials.
“The cost structures for industry are clearly tilting towards a huge United States dollar component at this rate.
“Thus, industry is being cornered into dollarisation to sustain operations at the barest minimum,” CZI chief executive officer Sekai Kuvarika told the Daily News yesterday.
“What we are not clear about is whether we should make special applications to be allowed to trade in foreign currency … through the legal sale of our goods.
“Profitability is now a tall order, as foreign currency is not available at the interbank, which means it has to be acquired elsewhere where it costs more.
“Pricing these costs into our products for a population with depressed aggregate demand is where the wheels just stop moving,” Kuvarika added.
She also urged the government to show commitment to its policies, which she said would have a direct impact on all sectors of the economy.
“The move towards re-dollarisation of fuel will also re-dollarise transport … it will dollarise electricity further. Remember, we purchase fuel to power generators since the power grid is short of supply.
“We welcome the step towards the liberalisation of the fuel sector, but it should be in the direction of de-dollarisation, not against that tide (as per the government’s strategy),” Kuvarika said further.
Last week, Reserve Bank of Zimbabwe (RBZ) governor John Mangudya said allowing fuel companies with their own foreign currency to import their supplies directly helped to stabilise the Zimbabwe dollar, while also promoting the use of the local currency.
“The transition to the exclusive use of the local currency is … a process and not an event.
“This means putting in place de-dollarisation milestones that take into account the realities on the ground that free funds are free to be used by their holders and that export retentions are still in place for use by exporters,” he said.
“This is critical to ensure that confidence is maintained and increased and that the local currency is not alienated.
“It is because of the above that free funds can be used to purchase fuel being procured by oil marketing companies under the direct fuel import scheme, without resorting to the foreign exchange from the interbank and or government. The same applies to electricity imports.
“Under these circumstances, the use of free funds for domestic transactions should not be confused as going back to dollarisation but as a pragmatic transition or approach to de-dollarisation,” Mangudya said.