Mthuli Ncube's sweeping move brings stability

Published: 01 July 2019

FINANCE Minister Mthuli Ncube's sweeping decision to discard the multi-currency system that had obtained in Zimbabwe for the past 10 years has brought with it some modicum of stability into the economy at least for a week but consumers continue to groan under the weight of high prices.

The free-fall of the then surrogate currency, the bond note, has been on a free-fall especially after the Reserve Bank of Zimbabwe announced a discontinuation of the 1:1 rate early this year and came just short of designating it as legal tender.

What followed was a wave of price increases on basic commodities sparking public outrage in recent days amid threats of social upheaval.

But as the situation reached tipping point, President Emmerson Mnangagwa's government made sweeping fiscal and monetary changes, abandoning the multi-currency system dominated by the US dollar and re-introducing the local currency as sole legal tender in all domestic transactions.

The announcement last week was met with shock and disbelief but had an immediate impact of firming the local dollar against the US and taming runaway parallel market rates that had threatened to plunge the country into chaos.

In February when the RTGS was launched as an autonomous currency, it was trading at US$1:2,5 on the official interbank market and around 1:3 on the parallel market.

However, in the following four months, the rate jumped to US$1:13 on the parallel market and around 1:6 on the official trading platform triggering chaos in the market.

Following last week's intervention, the local unit firmed, bringing the rate down from 1:13 to an average of 1:8 but prices of basic commodities remained unaffordable for most poor households as salaries have remained stagnant in the mayhem.

Most retailers had pegged their prices using higher black market exchange rates as well as offering discounts on US purchases.

Mnangagwa has insisted he will not turn to price controls.

A survey by NewZimbabwe.com over the weekend shows prices remained high despite the scrapping of foreign currency trading.

"We expected the prices to go down along with the currency rates but they didn't. I think most businesses were only profiteering as their prices were now based on black market exchange rates, despite some of them accessing foreign currency on the official market," said one Lizzy Banda in an interview with NewZimbabwe.com.

"Most families have resorted to one meal a day and at my house, bread is only for my daughter who is in pre-school. We have to manage and make sure a loaf lasts her the whole week."

Hardest hit have been government workers who, despite receiving a 29% salary increment in April, have remained the lost paid workers in the country.

They have watched their salaries erode overnight with most now earning less than US$50 if converted to foreign currency.

"I think the President (Mnangagwa) has failed us and should just resign. It's now even worse. We complained when bread price rose to $3,50 but now we buy it for $7 at our local tuckshop," said one civil servant Lindy Makone who stays in Ashdown Park.

Other commodities beyond bread have also remained static following last week's measures by government.

The sustainability of this however remains the million dollar question.

A bar of soap is pegged to an average of $10 in downtown tuckshops. No reputable supermarket was selling solid washing soap, a favourite of many families in Harare Central Business District (CBD) in the past weekend.

A two litre bottle of mazoe orange crush is selling for between $21 and $25 depending on brand, washing powder is going for as much as $54 depending on brands with the lowest selling for $25 per 2kg packet.

The price of meat is also stagnant with a kilogramme of beef and chicken going for as much as $25 and $23 respectively. A 2kg packet of rice has risen from $4 in February to as much $20.

The Consumer Council of Zimbabwe (CCZ) recently warned businesses against profiteering and indicated it would at some point push for withdrawal of licences from errant shop owners.
- newzimbabwe

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