Destabilization of economy amid government stabilization claims

BY CHRISTINE CHIROMO

The economic price hikes of basic commodities is yet another burden on the majority of Zimbabweans who have students returning to their academics, since schools reopened after a long covid-19 induced lockdown.

The government though trying to restart an economy that had already imploded well before the coronavirus crisis has seen most Zimbabweans suffering from hyperinflation. The inflation rate that was running at 676 percent in March, meant most urban Zimbabweans could not afford all basic needs. However as pegged in August, the inflation rate had risen to 837, 5 percent with monthly basic consumer prices increased by 8;4 percent

 Zimbabwe’s coronavirus stay-at-home message was hard to bear. Signs of a country coming unstuck are seen everywhere with daily shortages of electricity in most areas suffering from power outages, fuel increases, basic goods price increase even water that local councils have no money to maintain the aged pipes or invest in infrastructure

In the countrysides of 4.3 million people – one in three Zimbabweans – are facing food shortages as  a result of a drought last years, which was among the worst seen in a decade. The weakening economy amid a global pandemic, together with government’s inability to deliver economic reforms has seen the persistent food shortages and crippling economy.

A disappearing economy is seen through the fluctuating Inflation and unstable dollarization rate that continues to drop.

One Gweru resident from Lundi Park area, Mr Farai Munyanda who stormed the The Sun newsroom said, “The rise of prices has become a norm that it has put the unemployed and the civil servants at a critical point whereby their salary is now a hand to mouth regimen.”

We need the price controllers to step in and have a close look at the prices because most goods and services are now expensive to an extent that we are now forced to live without them. We need stability in the price control, he added.

Yet another Midlands resident a mechanical engineer, Mr. Amos Chifashu expressed similar sentiments, “Price increase is caused by the current hyperinflation and the USD rate lowering is an idea of trying to reduce inflation however this affects most people negatively as they can hardly bear the cost of living in Zimbabwe

Economists suggests that: “There is no economic stability. The economy encompasses a lot of variables and real sector performances such as agriculture, mining, manufacturing, tourism. What is there now and is needed is some form of exchange rate stability.”

They emphasize that exchange rate stability not price stability is needed. Exchange rate stability is there due to interventions done by the government of introducing the exchange rate auction in which an allotment is done every Tuesday and the removal of Eco cash agents. But prices continue to rise due to other factors such as supply side. Demand for products is suppressed due to limited income and the available goods and services on the shelf space are not being bought as expected, so suppliers are increasing prices to cover up for the few products being bought and to cover up for the cost of raw materials of producing the products as well as transportation costs . It’s called cost push inflation.

Zimbabwe’s economy shrank by eight percent last year, and the government fears it could contract by up to 20 percent by the end of 2020. It blames the freefalling economy on “sanctions” imposed by hostile Western governments, consecutive droughts, and now COVID-19. Its critics argue the collapse is the culmination of years of mismanagement by the government that has ruled since independence.

As seen in the pricing in most retail shops in Gweru, basic goods and commodities have increased by a large margin. Cooking oil price has risen from USD 2.50 to USD2.75-USD3. Similarly, basic goods such as flour has risen from USD 1.50 to USD2.05 whilst rice has risen from USD 1.50- USD 1.99 to USD 2.60.

To the majority of Zimbabweans who had turned to other sources of energy amid constant price increases, the pressure proves hard to bear especially since the raise of civil servants Covid-19 allowance to USD$75 has no effect when compared to the incessant goods and services price increases.

Financial analyst, Mr. Farai Mangwende is of the view that the interbank is the one dropping and the black market is still going  up and he states that It is a floating exchange rate causing the interbank rate to drop because the laws of demand and supply are in play. This therefore causes fluctuations of prices of basic commodities to go up.

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When the currency has no value it affects everything including inflation, and trading, hence since Zimbabwe imports most of its goods, it is inevitable that prices would go up to meet the standards of a foreign currency we import from.

Gweru shops currently use the $90-$100ZWL cash per 1USD but when you sell on the streets, the rate is 85ZWL or less. With the Eco cash ban on cash in or cash out weeks ago, the primary means through which illegal black market traders buy and sell forex has aided in putting a damper on the consumer marketing.

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