The Sunday News
Judith Phiri, Sunday News Reporter
PRICES of basic goods have started to stabilise as the Zimbabwean dollar continues firming against the United States dollar ending weeks of market volatility that was characterised by wanton price increases and speculative behaviour.
The Zimbabwe dollar on Thursday firmed by more than $1 000 against the United States dollar after weeks of a downward trend that saw the business community responding by increasing local currency prices of basic commodities to try and force a wholly dollarised economy.
The Zimbabwean dollar averaged $5 739 to the 1 USD up from a high of $6 926 to 1 USD in the previous week as a result of a cocktail of measures put in place by the Government to stabilise the exchange rate with stakeholders urging businesses to reduce the prices in local currency in response to the current economic fundamentals obtaining. In an interview, Confederation of Zimbabwe Retailers president Mr Denford Mutashu urged businesses to respond to the stability in the exchange rate by reducing prices in Zimbabwean dollars.
“The expectation is to begin to see prices falling in line with key economic indicators like stability in exchange rates, improved power supply and other Government measures. We have seen price stability in most retail shops but we want to see more. We want to see them reducing prices relative to the economic developments. They should start pricing responsibly,” said Mr Mutashu.
Local economist and National University and Science and Technology (Nust) lecturer Mr Stevenson Dlamini said what was not likely to be witnessed was a reduction of prices, although the rate at which prices were going up had slowed down lately. The stakeholders said the developments in the economy were evidence that the interventions put in place by the Government were effective in stemming inflation which they said was no longer economic but political.
In a bid to further promote the use of the local currency, the Government directed that for the June 2023 Quarterly Payment Date (QPD), taxpayers should settle 50 percent of the foreign currency portion of their corporate tax obligations in Zimbabwean dollars.
Any payments in USD or any other foreign currency for the portion of corporate income tax due in local currency for the June QPD would not be accepted. Mr Dlamini said the raft of Government policy measures aimed at reigning in the runaway inflation have begun to kick in.
“The floating of the exchange rate on the wholesale market has destabilised the parallel market and shown the formal market that the Government is now more committed to the price discovery mechanism of the local currency. This has been further buttressed by the recent fiscal policy measure that requires the payment of corporate tax in local currency.
“This is forcing even firms that were beginning to reject the local currency to start demanding it at the official market exchange rate and thus pushing up demand and value of the local currency,” he said.
Mr Dlamini said the monetary policy measures have also signalled to the market that the Government was committed to keeping the Zimbabwean dollar as a currency as well as ensure that people derive value out of it. Mr Dlamini said above all, the scrapping of the surrender requirements helped reduce the supply of the local currency which further brought stability.
“This was complemented by the reduction from 40 percent to 25 percent forex surrender by exporters which means the RBZ will be pumping in less local currency into the market.”
Economic commentator and businessman Mr Morris Mpala said the development on the market of increased USD use was taking off pressure from the exchange rate as importers were getting USD for their imports from their day-to-day economic activities.
He called for the Government to address more of the fundamentals to arrest inflationary pressures so as to sustain the gains made in respect of giving value to the local currency.