PHILLIMON MHLANGA
Several wholesalers and retailers of basic commodities have clandestinely restored a three-tier pricing system with goods and services now attracting prices for plastic money, Zimbabwe dollar and the United States dollars.
This is causing serious price distortions which in turn is increasing inflationary pressures and now inflicting pain on the country’s restless citizens.
The development comes after the Reserve Bank of Zimbabwe governor, John Mangudya recently allowed the use of the greenback in local transactions during the coronavirus pandemic.
Some of the retailers, who have created a three-tier pricing system, told Business Times this week that this has been fuelled by the need to access the scarce United States dollar by setting higher prices for payments using the Zimbabwe dollar and plastic money.
The greenback has been wiped out of formal circulation, giving rise to the selling of cash at a punitive premium on the parallel market and a three-tier pricing emerging.
Confederation of Zimbabwe Retailers president, Denford Mutashu said three-tier pricing could be a permanent feature for some time because of the lack of confidence in the local currency.
“It’s an issue of confidence around the local currency,” Mutashu said.
“It [local currency] is a serious matter that needs to be worked on. At the moment, no one can explain why the local currency is depreciating like that in a lockdown.
Government has pegged it at ZWL$25: US$1 on the formal market, but there is no trade in there because the majority of companies are using the parallel market rate for pricing. Probably, the three-tier pricing is going to be a permanent feature for some time as there is no confidence.
In this market, one wishes to hold a currency that locks value. Even if you have stocks, one needs to make sure value is locked. “
He added: “Another issue is inflation which is galloping. So, inflationary pressures are quite a big problem.”
Zimbabwe’s annual inflation rate reached 676.39% in March from 540.16% in February, representing a 136 percentage points increase, according to Zimbabwe National Statistics Agency report released this week.
This is the highest inflation rate since 2009.
The central bank is targeting 50% by year-end. The month on month inflation also surged to 26.59% in March from 13.52% in February, reflecting a 13.07 percentage points’ gain.
This is despite the Reserve Bank of Zimbabwe putting in place a disinflationary programme. Zimbabwe’s runaway inflation is mostly driven by the shortage of foreign currency, which has led to huge disparities in the exchange rate between the Zimbabwe dollar and the United States dollar.
Consequently, prices of basic commodities continue to rocket due to the collapse of the local currency on the parallel market.
