RESERVE Bank governor Dr John Mangudya has warned pharmacies that are receiving support from the foreign exchange auction trading system against pegging their prices using the parallel market exchange rate, saying such practices destabilise the economy.
Out of the US$2 billion dispensed by the Central Bank through the auction so far, nearly US$132 million has gone towards supporting medical and chemicals imports.
In a speech read on his behalf at the Retail Pharmacists Association Conference in Harare yesterday, Dr Mangudya said the Bank will ensure uninterrupted provision of foreign currency to the pharmaceutical industry.
Since the launch of the Dutch Foreign Exchange System in June 2020, the Bank has dispensed about US$2 billion to various sectors of the economy,” he said.
“Of this, about 6,5 percent or US$132 million was disbursed toward medical and chemicals imports; thus illustrating the Bank’s commitment to sustaining this important sector. The improved availability of foreign currency has resulted in increased capacity utilisation by industry from 36 percent in 2019 to 47 percent in 2020 and further to a projected 61 percent in 2021.
“It is, however, worrisome that despite the support measures, some economic agents, including retail pharmaceuticals firms, have continued to benchmark and index their prices to the unjustified parallel exchange rate.
“It has been noted that the practice is being deliberately done as a way of discouraging customers from using the domestic currency.
“This is taking advantage of the inelastic demand for health care, including pharmaceuticals. Inelastic demand means the public pays whatever the price for health care, which in the process compromises exchange rate dynamics and affordability of drugs by the majority of the populace.”
Dr Mangudya said the widening foreign currency premium on the informal market was not linked to any economic fundamentals.
“This errant behaviour of price indexation to the parallel exchange rate, especially by the beneficiaries of the auction system, has inadvertently contributed to the widening of the parallel exchange rate premium with destabilising effects on prices and the whole economy at large.
“The Bank, therefore, calls upon business and the retail pharmaceutical industry in particular, to act responsibly in their pricing methods in order to consolidate and sustain the stability gains that we have already achieved.”
He said the pharmaceutical industry was playing an important role in the country’s fight against the Covid-19 pandemic.
The conference was held under the theme: “Evolution of Community Pharmacy Practice Towards Universal Health Coverage by 2030”.