Source: US$500m facility to stabilise prices | The Sunday Mail May 19, 2019
Government, through the Reserve Bank of Zimbabwe (RBZ), will begin drawing down a new US$500 million facility tomorrow to supply the interbank foreign currency market, in a development that monetary authorities say will “go a long way to stabilise the exchange rates and prices of goods and services in the economy”.
In an announcement on Twitter yesterday, the central bank said the funds will help to meet foreign currency payments for both businesses and individuals.
Reacting to the announcement, Finance and Economic Development Minister Professor Mthuli Ncube also indicated that the facility, which has been raised from international banks, “will increase the supply of foreign currency for imports, for industry and other sectors”.
The apex bank introduced the interbank market in February this year to promote a market-determined exchange rate through trading on a willing-buyer, willing-seller platform.
However, individuals and companies have not been able to readily access foreign currency on the market as it was considered inefficient.
Worryingly, the exchange rates have also been lagging behind the parallel market, forcing potential buyers to shift to the latter, which has proved to be disruptive to local pricing system for goods and services.
The initiative is likely to be complemented by industry, which has since resolved to work closely with Government and labour in urgently developing an action plan that is expected to stabilise prices of basic commodities and determine fair remuneration for workers in order to “arrest” current distortions that are causing consumer discomfort.
Business believes that “the basic economic fundamentals are positive” and “the economy is currently generating (foreign) currency that should be enough for the economy”.
Business membership organisations (BMOs), who included representatives of industry, agriculture, mining, banking and the retail sector, agreed at a high-level meeting held in the capital on Friday that the challenges that are being experienced in the economy can be directly linked to foreign currency availability and pricing distortions.
“Our economy is in a position of imbalance due to distortions that need to be attended to so as to bring it back into balance with actions that will stabilise the exchange rate and also restore the purchasing power of consumers. lf these distortions are not attended to, they will continue to cause further distortions and damage across all sector of the economy,” said Confederation of Zimbabwe Industries (CZI) president Mr Sifelani Jabangwe, who chaired the meeting.
“lt is acknowledged that the economy is currently generating currency that should be enough for the economy. lt is thus imperative for buyers and sellers of currency who are both from the private sector to come together to find urgent interventions to stabilise the situation. A functional interbank market is central to stabilising the state of the economy,” he added.
It is believed that “a competent team” can help draw up the envisaged formula within a week.
Most notably, stakeholders have committed to develop standards of disciplined behaviour that would be adopted by the tripartite of Government, business and labour “in order to achieve economic growth and stability”.
The process is expected to ultimately feed into the Tripartite Negotiating Forum (TNF) once the TNF Bill has been passed into law, which will make provisions of the TNF binding to all parties.
Recommendations from Friday’s meeting were reportedly handed over to chair of the Presidential Advisory Committee, Mr Joe Mutizwa, who also attended the indaba.
The National Competitiveness Commission (NCC) was also in attendance.
Mr Mutizwa told The Sunday Mail yesterday that he was not authorised to talk.
However, Mr Jabangwe said technocrats and business representatives agreed to implement short-term measures to stabilise the economy.
“This process is expected to yield interventions to arrest the decline and stabilise the situation in the short term as it will involve all economic agents. The process will yield an outcome which is a model that can be used to bring back balance to pricing of various commodities as well as rewarding of labour,” said Mr Jabangwe.
NCC chair Mr Kumbirai Katsande said there was a need for a holistic approach on the price issue in the whole value chain.
Dialogue among Government, the private sector and the Reserve Bank of Zimbabwe (RBZ), especially on 14 key basic commodities such as bread, flour, sugar, cooking oil, mealie-meal and salt, among others, would be very helpful, he added.
“It’s important that we get transparency on value chains of commodities; for instance, if the price of sugar increases, it then affects other goods downstream. We are not a price control unit, but we are there to advise Government on prices and income. We are looking at ways of dialogue on prices so that we have a holistic approach to prices.”
Separately, Government has launched an investigation into anti-trust behaviour and price rigging on mounting speculation that some companies could have abused the RBZ’s foreign currency facility.
Consumers are presently being squeezed by skyrocketing prices of basic goods, which Government believes are unjustified.
Head of the Special Anti-Corruption Unit in the Office of the President and Cabinet Mr Tabani Mpofu said there were
serious concerns over the sudden jump of basic commodities such as life-saving drugs in pharmacies and food stuffs.
The investigations also reportedly include the Competition and Tariff Commission (CTC).
“There are allegations of cartels which are stifling competition. There is suspicion that in most of these commodities, there is corruption. It is alleged that there are single players in certain sectors such as pharmaceuticals that are controlling prices of drugs. This must be investigated because it has a direct impact on people’s lives,” he said.
“We are also looking at bread prices because there are allegations that there could be collusion between bakers and some millers.”
The price of bread has been of concern lately as retailers have pegged it at around $4 per loaf, up from around $1,80 two months ago.
It is understood that the probe could have been prompted by allegations that some unscrupulous millers were misrepresenting to the central bank to get foreign currency allocations while they would have sourced their products locally.
“This is corruption and it needs thorough investigation because some businesspeople are toying with peoples’ lives. Various State institutions are now busy investigating price cartels,” said Mr Mpofu.
While it is generally believed that some retailers are aligning the price of their commodities to upswings in foreign current exchange rates on the parallel market, both fiscal and monetary authorities say this is dishonest.
CTC director Ms Ellen Ruparanganda could neither deny nor confirm the investigation into price cartels.