EDITORIAL COMMENT: US$500million facility to stabilise prices, tame black market

THERE has been a surge in parallel market rates of late, triggering massive price hikes and an erosion of disposable incomes. Businesses, most of whom source their foreign currency on the black market, have been hit hard and are passing on the cost of procuring raw materials and other inputs to consumers who are bearing the brunt of the rise in the cost of living.

Last week, the parallel market rate escalated to as much as USD1:7RTGS$ causing panic in the country. Manufacturers, wholesalers and retailers are pricing their products based on the prevailing parallel market rates and this is causing massive distortions in the economy. Pleas from Treasury and the Reserve Bank of Zimbabwe for businesses to desist from pegging their costs on the black market rate have fallen on deaf ears with most firms fearful of failing to restock should they price their products purely on fair business practices. This has seen even businesses that do not import anything tracking the parallel market rates and pricing their commodities accordingly. 

Despite Government introducing the interbank market for foreign currency in February this year to promote a market-determined exchange rate through trading on a willing buyer-willing seller platform, businesses are shunning it because in most instances there are more buyers than sellers on that market since its rates are not competitive. 

Resultantly, the interbank rates have been lagging behind the parallel market forcing potential buyers to shift to the latter which has proved to be disruptive to the local pricing system for goods and services. One of the reasons for a sluggish start to the interbank foreign currency market is that Government did not adequately capacitate it so that it crushes the black market which has continued to thrive to the detriment of the economy. 

Yesterday, Government, through the Reserve Bank of Zimbabwe, said it would today begin drawing down a new US$500 million facility to supply the interbank foreign currency market, in a development monetary authorities say will go a long way in stabilising the exchange rates and prices of goods and services in the economy. In an announcement on Twitter, the central bank said the funds would help to meet foreign currency payments for both businesses and individuals.

Reacting to the announcement, Finance and Economic Development Minister Professor Mthuli Ncube also indicated that the facility, which has been raised from international banks, “will increase the supply of foreign currency for imports, for industry and other sectors”.

The initiative is likely to be complemented by industry, which has since resolved to work closely with Government and labour in urgently developing an action plan that is expected to stabilise prices of basic commodities and determine fair remuneration for workers in order to “arrest” current distortions that are causing consumer discomfort.

Business believes that “the basic economic fundamentals are positive” and “the economy is currently generating (foreign) currency that should be enough for the economy”. 

Indeed, Zimbabwe is generating enough foreign currency for the size of its economy but distortions on the market and abuse of the RBZ forex facility by unscrupulous companies are negating efforts to stabilise the economy. In this regard, we are glad that Government has launched an investigation into anti-trust behaviour and price rigging amid mounting speculation that some companies are diverting the forex they get from the RBZ to dabble in parallel market activities. 

Consumers are presently being squeezed by skyrocketing prices of basic goods, which Government believes are unjustified. Head of the Special Anti-Corruption Unit in the Office of the President and Cabinet Mr Tabani Mpofu told our sister paper, The Sunday Mail, that there were serious concerns over the sudden jump of basic commodities such as life-saving drugs in pharmacies and food stuffs.

 “There are allegations of cartels which are stifling competition. There is suspicion that in most of these commodities, there is corruption. It is alleged that there are single players in certain sectors such as pharmaceuticals that are controlling prices of drugs. This must be investigated because it has a direct impact on people’s lives,” he said. 

“We are also looking at bread prices because there are allegations that there could be collusion between bakers and some millers.”

The price of bread has been of concern lately as retailers have pegged it at around $4 per loaf, up from around $1,80 two months ago.

There are also allegations that some unscrupulous millers are misrepresenting to the central bank to get foreign currency allocations while they would have sourced their products locally.

 “This is corruption and it needs thorough investigation because some businesspeople are toying with people’s lives. Various State institutions are now busy investigating price cartels,” said Mr Mpofu.

We welcome the probe and hope authorities will get to the bottom of the shenanigans of the cartels and bring them to book.

You Might Also Like

Comments