BY SHARON BUWERIMWE /PRIVELEDGE GUMBODETE
CONSUMERS should brace for more basic commodity price hikes as inflation continues to rise and the foreign currency exchange auction system falters, economists warned yesterday.
Last week, foreign currency auction rates jumped by almost 50% from $159,34 to $258, 54.
The Reserve Bank of Zimbabwe (RBZ), has allegedly been struggling to effectively release the allotted forex to companies.
Miners and captains of industry last week appeared before the Budget and Finance Parliamentary Portfolio Committee and told members of Parliament that the central bank has been struggling to release the allotted foreign currency from the auction system.
Economist Gift Mugano warned that the Dutch auction’s failure will result in many businesses that have been trading in the formal market, turning to the parallel market for their foreign currency needs.
“Prices will continue shooting up because those who were getting foreign currency from the auction were following rules and selling at an auction rate, and now they are forced to increase their prices by 100%. It means that consumers will continue to suffer since their salaries were not increased,” Mugano said.
“The Russia-Ukraine crisis didn’t force the Zimbabwean government to manipulate the exchange rates of the auction system and ignore rules and principles of the Dutch auction in terms of transparency. Another issue is that the government is taking almost four months to give companies and people who would have been allocated foreign currency after bidding their money,” he added.
Economist, Eddie Cross said: “The reality in the auction system is that since we started in 2020, it has increasingly been unable to meet the demand for foreign exchange in the economic sector. As a result the private sector has turned to the informal market for foreign exchange, and this has driven up the parallel market rate. It is the parallel market rate that is dictating the consumer prices. That is the main driver of inflation in Zimbabwe.”
Confederation of Zimbabwe Retailers president Denford Mutashu said: “What we need to do is to strengthen the auction system and work on grey areas that we would have identified. What we basically need right now is to ensure that genuine productive players continue to get support from the auction and once they get the money, they should deploy it to where they have applied for it. They must also use checks and balance mechanisms and follow up on those getting foreign currency from the auction.”
RBZ spokesperson Khumbulani Shirichena said he was in a meeting when contacted for comment.
Meanwhile, Citizens Coalition for Change interim vice-president Tendai Biti has blasted government’s economic policies describing them as “kick and rush economics”.
Speaking during Alpha Media Holdings’ HStv’s Freetalk programme, Biti said: “You cannot have kick and rush economics. Government should simply re-dollarise, and float the Zimbabwe dollar. What businesses want is predictability and certainty.”
Biti said the Dutch auction system should be abolished in favour of a willing-buyer and willing-seller system determined by the prevailing rates on the market.
“Government needs to live within its means because it is living beyond. It is now monetising the budget deficit through this excess printing of money which is done at the RBZ through Treasury Bills,” he said.