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Zim$ dollar plunges, prices of basic goods 'reach another level'

by Staff reporter
13 Mar 2020 at 15:44hrs | Views
A DAY after under-fire Finance minister Mthuli Ncube introduced his latest measures, the country's thriving foreign currency black market ran amok amid a fresh wave of price hikes of basic consumer goods, the Daily News reports.

Observers immediately expressed the fear that things could soon get out of hand in the country if authorities don't move with speed to remedy the dire situation facing Zimbabweans.

This comes as the stressed Zimbabwe dollar's foreign currency black market rate continued to soar yesterday, as panicking ordinary people and businesses rushed to offload the increasingly worthless local currency in the aftermath of Ncube's new measures.

While the rickety Zim dollar had mostly closed at around 42 to the American dollar on the black market on Wednesday, it plumbed new lows yesterday — averaging about 46 to the much coveted greenback.
And as expected, the negative impact of Ncube's new economic measures and the weakening Zim dollar are being felt in the pocket acutely by broke consumers, with many retail outlets hiking prices, while some shops even temporarily stopped trading yesterday to arrive at "correct" prices.

To make matters worse for ordinary people, many tuckshops in downtown Harare and in the high density areas were demanding unavailable cash only for their precious goods.

A survey by the Daily News in the Harare central business district (CBD) confirmed that prices of most basic goods had risen sharply overnight.

The price of bread went up from $19 on Wednesday to nearly $30 yesterday. A crate of 30 eggs had increased from $96 to $115, while a 10kg bag of subsidised roller-meal — which is in short supply — now retails at $230, from $110 previously.

Other basic goods whose prices were increased significantly include a two-litre bottle of cooking oil, which rose from $74,10 to $94.

In some supermarkets, the prices of basic commodities such as soap, flour, powdered milk and sugar did not have price tags, as the shops were preparing to introduce new prices.

Most shop owners told the Daily News that the surging parallel market exchange rate had affected their business, as many people were not buying their goods because of the new price increases.

"This area is normally busy with people who come to buy commodities downtown because we offer affordable goods.

"However, and as you can see, business is very slow. People are not coming to buy because we have increased prices to remain in business.

"We buy foreign currency on the black market which we then use to purchase commodities like soap, cooking oil, flour, rice and others in South Africa, Zambia and Botswana for resale.

"So, if the exchange rate goes up, our prices have to go up as well, otherwise we will operate at a loss and risk closing down," one shopkeeper said.

Another small trader said they were now demanding cash because of Ncube's new measures, and in a bid to retain value.

"With cash, it's easier to negotiate for a good exchange rate compared to money transfers, which attract additional charges.

"This is why we are now charging for our products in cash because we cannot buy using transfer money outside the country and neither can we get a good exchange deal with that.

"It's high time our leaders accept failure and move over to make way for people who will solve our problems once and for all," the trader said.

Other people who spoke to the Daily News also expressed great frustration over the worsening economic situation.
"What I don't understand is why the government continues to introduce these measures that are not helping anyone at all.

"Every day we are waking up to price increases and yet our salaries are not increasing. How does this government expect us to live?

"It's high time that Mnangagwa and (MDC leader Nelson) Chamisa come to the negotiating table and find solutions to our problems.

"If they really care about the welfare of our people, then they need to put their differences aside and do what is best for everyone," Primrose Duve said.

Another consumer, Ronald Masimba, warned that the new wave of price increases was roiling poor citizens, adding that it was only a matter of time before the situation got out of hand.

"Right now our landlords are demanding that we pay rent in United States dollars. Commuter omnibus operators are charging exorbitant fares and as parents we also have school fees to pay.

"The government has really stretched us to the limit by failing to come up with measures to address this economic crisis and very soon something is going to have to give," he said.

Meanwhile, business leaders warned that the latest government measures would cause much pain to both companies and consumers.

The president of the Confederation of Zimbabwe Retailers (CZR), Denford Mutashu, said more price increases were expected as retailers were uncertain about the impact of the newly introduced measures.

"The market is always jittery when it comes to policies that impact directly or indirectly on the currency situation in the country.

"There is, on one hand, a wait-and-see attitude, while others are in panic mode and unsure of the impact of the measures.

"The foreign currency market will find stability at some point, but only if the measures are supported by real production," Mutashu said.

On his part, the president of the Confederation of Zimbabwe Industries (CZI), Henry Ruzvidzo, said the spiralling black market rate was a result of some individuals taking advantage of the current economic crisis.

"What we need as industry is a stable economic environment, without an ever increasing exchange rate, foreign currency shortages and hyper-inflation in order for us to start producing and contributing towards economic development.

"Since its introduction, the interbank market has not worked for us or improved access to foreign currency.

"It will be interesting to see how then, with these new measures such as the introduction of interests and incentives, the market will operate," Ruzvidzo said.

On Wednesday, Ncube said the government was floating the plummeting Zim dollar, to mitigate the savage battering that it is receiving on the parallel market.

"Zimbabwe has had no transparent and effective foreign exchange trading platform for a long time.

"Consequently, official rates have not been effectively determined, while a thriving parallel market has developed.

"To correct this anomaly, an electronic forex trading platform based on the Reuters system is being immediately put in place.

"This platform will allow foreign exchange to be traded freely amongst the banks and permit a true market exchange rate to be determined," Ncube said.

In June last year, Ncube rocked the local market with his sudden decision to end the general use of multiple currencies in the country — including the US dollar — without putting adequate measures in place to shore up the resuscitated Zimbabwe dollar.

And in a bid to stop the use of multiple currencies, the government also invoked Statutory Instrument 212 of 2019 to support the ban on trading in US dollars and other foreign currencies.

However, and following the government's rushed ban of the general use of the United States dollar in the country, the much coveted greenback has come back with a bang — with many businesses and ordinary people now openly opting to sell their goods in that currency.

Zimbabwe is in the grip of a huge economic crisis — the worst in a decade — which has seen the country continue to experience skyrocketing inflation, as well as debilitating shortages of water, power, fuel, critical medicines and foreign currency, among a myriad other challenges.

Source - dailynews