BY MIRIAM MANGWAYA
GOVERNMENT says it will not control prices of commodities which have skyrocketed in the past week following the promulgation of Statutory Instrument (SI) 127 of 2021 which seeks to regulate foreign currency exchanges.
SI 127 of 2021 prohibits business operators from charging above the official exchange rate and empowers authorities to punish those that refuse to take the Zimbabwe dollar for local transactions.
While presenting a ministerial statement on SI 127 of 2021 in the National Assembly on Thursday, Finance deputy minister Clemence Chiduwa said government would allow the market to regulate itself.
He was responding to legislators who had raised concerns over continued price hikes of basic commodities.
“I would like to assure the House that we are not going to control prices. We will allow businesses to thrive and come up with their own pricing models but what is very critical in economics is effective demand,” Chiduwa said.
“You can increase prices the way you want, but what is critical is effective demand. When you have increased your prices, are people going to buy? You can only buy where there is no choice but look at how the Zimbabwean economy is dichotomised between the informal and formal sector. Price controls are not going to assist us as a country, they will take us back but as I have mentioned, there is the issue of effective demand and then the issue of import parity,” he said.
Chidawu also defended the forex use measures saying they protect consumers from abuse by unscrupulous businesses and also enhance convergence of parallel and formal exchange rates.
“We are not banning our people from importing. I know this is going to put a strain again on the demand for forex, but what I can assure you is that in the medium term, there is going to be sanity because of lack of effective demand,” he said.
“It happened last year and after some two to three weeks, we started to see prices going down and I can assure you that prices will go down. Price stability of goods and services, customers will be able to settle payments of goods and services in either currency. The SI promotes market discipline which is a key anchor of price and financial stabilisation strategies.”
Chidawu said the Finance ministry had organised a breakfast meeting with various business institutions to deliberate on issues around promulgation of SI 127 2021.
Policy analyst Tinashe Eric Muzamhindo said government must not impose price controls but create a conducive environment for the market to operate.
“We need proper sound development policies. The market has panicked over the SI,” Muzamhindo said.
The market is reacting to the position of the government on foreign currency use. We are likely to see a situation where business operators will pull out their goods from shelves. In another reactive way, prices will continue hiking. Government ought to have consulted the business and consumers before imposing the regulation. We are likely to experience shortages and prices will hike in local currency to match the government gazetted US dollar rate.”