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Businesses ditch Zimdollar

by Staff reporter
28 Apr 2023 at 07:04hrs | Views
GOVERNMENT yesterday threatened to unleash the Financial Intelligence Unit (FIU) on retailers refusing payment in the local currency or limiting the number of items consumers can buy in Zimdollar, which they say has become highly unstable.

The local currency, which was reintroduced in 2019 after a decade of multicurrency system, is trading at a 100% premium on the parallel market where it is pegged at between $2 100 and $2 200 to the greenback; and US$1 036 on the official market.

An alarmed government urged the nation to be calm in response to the sharp decline of the Zimdollar with Vice-President Constantino Chiwenga telling participants at the Zimbabwe International Trade Fair International Business Conference in Bulawayo on Wednesday that authorities were putting measures in place to maintain exchange rate stability.

"The transitory exchange rate volatility in the parallel market witnessed in the economy for March this year is merely a reflection of the store of value demand for foreign currency," Chiwenga said.

"Bold measures are being implemented by government to foster price and exchange rate stability in the economy.

 "These measures include tight monetary and fiscal policy, insistence on value for money for government procurement and effective monetary and surveillance by the Financial Intelligence Unit."

Some consumers told NewsDay that retailers had put a moratorium on how much stock customers could buy with the Zimdollar.

It was the same with other products such as cooking oil, meat and mealie-meal, including beverages at some retail shops in the capital where retailers in the capital and other major cities were selling selected goods excusively in US dollars.

"They are paying us in local currency but they are not accepting it at shops. It's really sad," a consumer told NewsDay.

An official at one of the country's leading meat suppliers yesterday confirmed the limitations placed on consumers, but said this was to ward off unscrupulous businesspeople seeking arbitrage.

"There are some businesses trying to take advantage of the fact that we are selling in local currency to come a dump their Zimdollar stock and then sell the meat or merchandise they buy from us in US dollars.

"This has become prevalent, so to dissuade this practice we are limiting stocks on certain products," said the official who spoke on condition of anonymity.

Some large retailers were also forward pricing, saying that the local currency was on a free fall and they were hedging to avoid possible exchange rate losses.

Others simply restricted purchases to two units on some products.Some of the products whose stocks are being limited included cooking oil and rice.

Finance deputy minister Clemence Chiduwa said the FIU was monitoring developments in the retail sector.

 "We are getting reports that some supermarkets are demanding payment for certain products exclusively in US dollars," Chiduwa said.

"The laws on Bank Use and Promotion Act apply the same way as trading in the parallel market.

"This is illegal and all operators are urged to abide by the laws. We are closely monitoring the market delinquency and deviance which is a violation of the law.

"The FIU is taking appropriate action against those who are exclusively accepting USD on certain products."

He, however, acknowledged that the Zimdollar was losing value.

"The continued depreciation of the Zimdollar is due to inflationary expectations mainly driven by parallel market rates.The resultant instability due to chasing rates is negatively affecting all of us. Market players should focus on production and the generation of forex," Chiduwa added.

Consumer Council of Zimbabwe (CCZ) executive director Rosemary Mpofu urged retailers to abide by the country's laws.

"We note with great concern as CCZ, a consumer advocacy body, that some retail shops are selling and displaying some selected products selling exclusively in foreign currency namely the US dollar, contravening exchange control regulations that all products should be sold using a basket of currencies including Zimdollar, which is legal tender," Mpofu said.

"We urge such errant businesses to abide by the laws of the country as that move impacts on consumers spending and preferred choice of currency use.We urge the FIU to rein in such retailers, urging consumers to report such shops."

Delta Beverages spokesperson Patricia Murambinda, told NewsDay that they were not responsible for the actions by retailers in charging their products exclusively in US dollars.

"The retailer will be the best person to respond to your inquiry as individual outlet product pricing is their ultimate responsibility," Murambinda said.

The local currency, reintroduced in 2019, has taken a huge beating in recent days, pushing up the cost of basics and services beyond reach of many.

On Tuesday, the Zimbabwe National Statistics Agency (Zimstat) said the country's food inflation remains high, and kept on rising as the local currency keeps losing value.

According to Zimstat, food poverty line (FPL) and total consumption poverty line (TCPL) is now $25 170 and $33 044 per person respectively.

Last month, FPL stood at $22 560 while TCPL was at $29 778.

ZimStat director-general Taguma Mahonde while presenting a report on poverty datum lines said: "The food poverty line (FPL) represents the amount of money that an individual requires to afford a daily minimum energy intake of 2100.

"The consumer price indices (CPI) was 280,48 in April 2023, 274,01 in March 2023 and 160,13 in April 2022.

"The CPI for housing, water, electricity, gas and other fuels had the highest month-on-month inflation rate of 7,9% followed by health at 4,%.

"The year-on-year inflation rate (annual percentage change) for the month of April 2023 as measured by all the items CPI was at 75,2%."

Mahonde said the month-on-month inflation rate also increased by 2,3% cent.

"The month-on-month inflation rate in April 2023 was 2,4% gaining 2,3 percentage points on the March 2023 rate of 0,1%.

"The month-on-month inflation rate is given by the percentage change in the index of the relevant month compared with the index of the previous month."

Economist Prosper Chitambara said there has been too much liquidity of the Zimbabwe dollar on the market, pushing the exchange rate up.

"It is really about Zimbabwe dollar money supply that's what always causes the local currency to depreciate," Chitambara said.

"Liquidity has been increasing with government payments or salary increments."

Citizens Coalition for Change spokesperson Fadzayi Mahere told NewsDay that ‘the galloping black market rate comes against a background of gold smuggling, grand looting and State capture by the elite mafia.'

"A CCC government will offer a break from the present predatory order and a bridge that will accelerate transformation and make Zimbabwe a stable, democratic and development-focused, modern nation," Mahere said.

"We will reshape Zimbabwe through the creation of a shared vision and a sustainable transitional framework that will be the foundation of transforming the structure of our economy,eliminating poverty and enabling the pursuit of sustained, equitable and shared growth."

Source - newsday