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'Greedflation' rocks Zimbabwe

by Staff reporter
12 Jul 2023 at 08:13hrs | Views
THE ZW$ gained by 4,8% on the Reserve Bank of Zimbabwe Foreign Exchange Auction Tuesday amid concerns that most retailers remain reluctant to reduce prices of basic goods.

A trading update released at the close of weekly transactions shows that the rate moved to US$1: ZW$4 998 this week up from the rate of US$1: ZW$5 251 reached last week.

The ZW$ recorded significant gains on the RBZ Auction in recent weeks, ending market instability that was triggered by volatile exchange rates in the past months.

In comparison, exchange rate premiums have remained at around US$1:ZW$6 000 on the black market amid acute float shortages to fund higher premiums, a development that market analysts have since attributed to the rising local currency demand.

To this end, the Treasury has swiftly moved to allow tax payments in ZW$ over and above the raft of measures aimed at mopping up excess liquidity.

During the day's trades, players at the RBZ Wholesale Foreign Exchange Auction largely comprising bigger corporates only managed to take up US$5,8 million despite the fact US$20 million was on offer, testifying the degree of wilting ZW$ reserves.

Only ten bids were submitted on the platform.

On the Retail Foreign Exchange Auction where smaller traders for foreign currency a total US$US$460 130 was allotted with priority going towards productivity-related needs.

Despite the obtaining stability in exchange rates, a prices analysis done by revealed that retailers and the business community at large, have remained reluctant to reduce prices in line with the new exchange rate dynamics.

Notably, prices of goods and services which were increased in the past weeks in what the government has described as "greedflation" still remain in force.

Finance Ministry Permanent Secretary George Guvamatanga in a recent interview said the soaring prices were unjustified.

"What we witnessed over the course of the past two months was not inflation as we know it in economic terms, but rather 'greedflation'.

"Their forward-pricing practices resulted in the fast escalation of prices in the shops without any justification," he said.

Mobile communications services providers, local authorities levies, and electricity tariffs still remain the same as was the case when the ZW$ depreciated.

This in turn has negatively impacted consumers who now have to endure higher prices at a recovering exchange rate premium.

Source - NewZimbabwe