Oliver Kazunga/Pride Mahlangu, Business Reporters
GOVERNMENT says the fiscal and monetary policies it is implementing will stabilise the exchange rate and keep under check, inflationary pressures, which have seen the annual inflation rate clock 540,16 percent as at February 2020, in the short to medium term.
The Zimbabwe National Statistics Agency (Zimstat) yesterday announced that the country’s annual inflation had soared to 540,16 percent as of last month. The report comes nine months after Treasury had suspended the publication of the results citing distortionary impressions following the shift to the Zim-dollar. At that time annual inflation was hovering around 176 percent.
“The year-on-year inflation rate for the month of February as measured by the all items Consumer Price Index stood at 540,16 percent,” said Zimstat.
“The month-on-month inflation rate in February was 13,52 percent gaining 11,29 percentage points on the January rate of 2,23 percent.”
Rising inflation continues to limit options for consumers who have suffered diminishing spending power as prices keep increasing in response to changes on the exchange rate. A snap survey conducted by this news crew in Bulawayo yesterday revealed that several leading retailers had further increased prices of basic goods, ostensibly in response to exchange rate increases. As of yesterday, the US$ was trading at $42 from $40 last week on electronic transfer on the parallel market while the official market trailed at $39.
During the visit, some shop workers were busy removing old shelf prices replacing them with new pegs. A 2kg packet of sugar now costs $44 from $38 last week while a 10kg bag of unsubsidised mealie meal has gone up to $230 from about $180. A 2-litre bottle of cooking oil now costs $84 from about $78 while green bar soap has risen to $42 from about $30. A loaf of bread now costs $27 from $21. Mazoe Orange Crush less sugar 2L went up to $87 from about $70. Tissue, salt, cerevita, bath soap and rice are also among the affected commodities.
While acknowledging the spike in inflation and subsequent price escalation, Finance and Economic Development Deputy Minister Clemence Chiduwa said Government policy interventions would restore normalcy in the market and enhance confidence in the local currency.
“The inflation rate at the moment is exchange rate driven. So, what is needed on our part is to stabilise the exchange rate,” he said.
“In terms of the stability of the exchange rate, the medium-to-long term is for us to produce. The stability of the exchange rate is on us being in a position to export.
“But in the short-term the movement in the exchange rate at the moment is due to a number of factors. One such factor is speculation and operations of the parallel market. This is where we are now saying we want to bring some stability and formality in the trading of currency.”
Last week Treasury liberalised the formal foreign currency trading system as part of measures to limit informal activities and ensure all the foreign exchange is traded through registered channels for the benefit of the economy.
Government went further to ban transfer of capital outside the country through dual-listed shares on the Zimbabwe Stock Exchange, and selling of these in foreign currency on other exchanges. Deputy Minister Chiduwa said the measures will curtail inflation based on derived economic indicators such as the Old Mutual Implied Rate.
“We have also looked at the fungibility of shares that are dually listed like the Old Mutual shares where people are getting the exchange rate from the implied rate,” he said. The suspension of the fungibility of the shares will last for a period of 12 months.
Independent financial market analyst, Mr George Nhepera, said the 540,16 percent year-on-year inflation indicates that Zimbabwe is now the only country in the Sadc region with a three-digit inflation rate. He said a higher inflation trend negatively effects financial markets and reduces consumer buying power.
“The only ‘financial vaccine’ in my view as a financial analyst is to adopt the multi-currency system largely made up of US dollar and Rand,” he said. “This has worked for us as a country in the past, with remarkable results. It can do the same now before the whole country is plunged into economic and financial ruin akin to 2006-8 period.”
Economist Mr Morris Mpala said monetary authorities should do more to arrest inflationary pressures. He feared that the liberalisation of the forex exchange market would force prices to go further up and suggested more effort be driven to controlling money supply growth.
Confederation of Zimbabwe Retailers (CZR) president Mr Denford Mutashu said price increases were a product of the whole value chain cost saying shops only receive the load and pass it on to the consumers.
“Prices are notable at the retailer and wholesaler stand, but it is a product of the whole value chain. The value chain has been increasing its prices citing hyperinflationary environment and the continued shortage of foreign currency and the power issues,” said Mr Mutashu.
“The high cost of doing business, especially now that manufacturers rely on importation of raw materials. The cost of the manufacturer will remain and some even increasing, because in an environment where you are not producing anything the costs will overburden the business.”
Consumer Rights Association spokesperson, Mr Effie Ncube said that rural consumers were the most affected.
“These increase in prices will affect the poorest of the consumers disproportionately. The consumers in rural areas are more affected because when bread is $27 here in rural areas it goes up to $30 something dollars,” he said.
“Considering that rural areas have no economy to rely on, therefore there are no incomes in rural areas meaning the poorest stay in rural areas. So, it means this increase is going to hit them the hardest.
“We are calling on Government again to come together with stakeholders and ensure that they cushion the poorest consumer and ensure that there is price stability for creditability sake.”
Consumer Council of Zimbabwe (CCZ) regional manager Mr Comfort Muchekeza said the prices dilemma was a problem of policy gaps and lack of confidence in the local dollar.
“If you look at the price of basic goods you will note that the change is only in the bond but when you go to the US dollar of the Rand the price remains the same.”