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Prices skyrocket in Zimbabwe

by Staff reporter
27 Oct 2023 at 06:18hrs | Views
The ongoing depreciation of the local currency is plunging Zimbabweans further into economic hardship, causing prices of essential goods and services to soar beyond the means of most low-income families.

The Zimbabwe National Statistics Agency (ZimStat) reported that the Total Consumption Poverty Line (TCPL) for a single individual increased from ZWL$95,462.53 in September to ZWL$105,072 in October 2023.

In October 2023, the food poverty line (FPL) for an individual was ZWL$80,512, while the TCPL for one person was ZWL$105,072.

As the economy deteriorates, employees are experiencing a decline in the real value of their salaries. To mitigate potential losses due to the local currency's devaluation, businesses and service providers are adopting forward pricing strategies. Some businesses have even started exclusively accepting foreign currency for their services. However, the majority of workers are paid in Zimbabwean dollars and must purchase foreign currency on the parallel market at a premium.

ZimStat also reported that month-on-month inflation increased by 1.5 percentage points in October, reaching 2.5%. The year-on-year inflation rate for October 2023, as measured by the Consumer Price Index (CPI), was 103.44%.

ZimStat warned that Zimbabweans would continue to grapple with rising prices of essential goods. The CPI for housing, water, electricity, gas, and other fuels had the highest contribution to inflation, followed by food and non-alcoholic beverages.

Former president of the Zimbabwe Congress of Trade Unions, Peter Mutasa, pointed out that a significant percentage of Zimbabwean workers were living in dire circumstances. Many workers are dealing with mental health challenges and high blood pressure due to the stressful economic situation. Mutasa also noted that over 73.5% of workers earned less than US$133 equivalent, and 52% earned below US$33 equivalent.

Economist Prosper Chitambara emphasized the importance of maintaining monetary discipline to combat inflation. Implementing economic reforms would help build investor and business confidence, ultimately promoting economic growth.

Economic analyst Yona Menon-Banda highlighted that local retailers often base their pricing on the parallel market, factoring in exchange rate risk due to high-risk perceptions. In the short term, controlling inflation involves managing liquidity and boosting public confidence in fiscal and monetary policy management.

President Emmerson Mnangagwa reintroduced the Zimbabwean dollar in 2019 after a decade of dollarization. The local currency has continued to depreciate and is trading at over ZWL$5,500 to US$1 using the official rate and between ZWL$7,500 to ZWL$8,000 on the parallel market. Many experts believe that a return to dollarization would help stabilize prices, as over 80% of transactions in the economy are conducted in US dollars. However, authorities have stated that the local currency will remain in use, with the dual currency regime set to end by the close of 2025.

Source - newsday