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Prices soar as new Zimbabwean currency struggles
11 Sep 2024 at 09:03hrs | Views
The launch of Zimbabwe's new currency, the Zimbabwe Gold (ZWG), has been marked by significant challenges, including a sharp rise in basic commodity prices. Since its introduction on April 5 at an exchange rate of 13.56 ZWG to the US dollar, the ZWG has depreciated slightly, prompting retailers to increasingly price goods exclusively in foreign currency.
A recent survey in Harare indicates that many shops have moved away from displaying prices in ZWG due to its scarcity. This shortage has forced both retailers and the public to rely on US dollars for transactions, further impacting the cost of living.
Currently, the official exchange rate stands at 1 USD to 14.8 ZWG, but the informal market rate is significantly higher, ranging between 24 ZWG and 28 ZWG per US dollar. This disparity has driven up the prices of essentials. For instance, a 2-litre bottle of cooking oil is now priced at around US$5 in supermarkets, while a 10kg bag of mealie-meal costs US$11. Other items like sugar, rice, and flour have also seen price increases.
Interestingly, local tuckshops offer lower prices compared to larger supermarkets. For example, a 2-litre bottle of cooking oil costs US$3.30 at tuckshops, compared to US$5 at supermarkets.
The Consumer Protection Commission (CPC) has voiced concerns over the recent price hikes, which have surged both in ZWG and US dollars. CPC spokesperson Kuda Mudereri highlighted that major retail outlets have increased prices for items like cooking oil from US$3 to between US$4.40 and US$4.80. The commission is investigating these changes and has issued compliance notices to businesses over excessive pricing.
The Confederation of Zimbabwe Retailers' president, Denford Mutashu, attributed the issue to disruptions in the supply chain. He noted that suppliers are demanding payments in US dollars, complicating the ability of formal retailers to restock and price goods in local currency.
Economists have criticized the ZWG's introduction, citing its lack of stability and vague policy backing. Chenayimoyo Mutambasere suggested that the ZWG's problems reflect a broader lack of confidence in the economy, while Stevenson Dhlamini linked the rising commodity prices to retailers' reliance on unofficial exchange rates and disruptions in the supply chain.
Authorities are urged to address these challenges by improving foreign exchange market liberalization and enhancing the price discovery mechanism for the local currency to stabilize the economy.
A recent survey in Harare indicates that many shops have moved away from displaying prices in ZWG due to its scarcity. This shortage has forced both retailers and the public to rely on US dollars for transactions, further impacting the cost of living.
Currently, the official exchange rate stands at 1 USD to 14.8 ZWG, but the informal market rate is significantly higher, ranging between 24 ZWG and 28 ZWG per US dollar. This disparity has driven up the prices of essentials. For instance, a 2-litre bottle of cooking oil is now priced at around US$5 in supermarkets, while a 10kg bag of mealie-meal costs US$11. Other items like sugar, rice, and flour have also seen price increases.
Interestingly, local tuckshops offer lower prices compared to larger supermarkets. For example, a 2-litre bottle of cooking oil costs US$3.30 at tuckshops, compared to US$5 at supermarkets.
The Confederation of Zimbabwe Retailers' president, Denford Mutashu, attributed the issue to disruptions in the supply chain. He noted that suppliers are demanding payments in US dollars, complicating the ability of formal retailers to restock and price goods in local currency.
Economists have criticized the ZWG's introduction, citing its lack of stability and vague policy backing. Chenayimoyo Mutambasere suggested that the ZWG's problems reflect a broader lack of confidence in the economy, while Stevenson Dhlamini linked the rising commodity prices to retailers' reliance on unofficial exchange rates and disruptions in the supply chain.
Authorities are urged to address these challenges by improving foreign exchange market liberalization and enhancing the price discovery mechanism for the local currency to stabilize the economy.
Source - newsday
