Zimbabwe businesses agree on a price stabilisation process as the economy worsens
Harare, Zimbabwe (PANA) - Zimbabwe business organisations have agreed to arrest the economic decline and stabilise the situation worsened by wanton price increases of basic commodities due to rising forex parallel market rates.
On Saturday, the forex parallel market rates jumped 30% to US$1:RTGS$6,5 from the start of the week as businesses are mostly sourcing their monies from this market to import raw materials or deal with other foreign obligations.
As such, businesses have included the cost of purchasing foreign currency into their goods and services resulting in price increases by an average of 30% while wages remain stagnant.
“A high-level meeting of business member organizations was held at CZI (Confederation of Zimbabwe Industries) on 17 May 2019. Business Membership Organizations representatives from, industry, agriculture, mining, banking and retail were present. The purpose of the meeting was to receive a report on the interbank market from economists and to deliberate on how business can work together to play their role in stabilizing the economy instead of working in silos. The National Competitiveness Commission was also represented,” CZI president Sifelani Jabangwe said in a statement.
“The business attendees agreed on an urgent process to be implemented collectively by business, government and labour. 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. The model will help to identify standards of disciplined behaviour that we need to adhere to as business, labour and Government in order to achieve economic growth and stability.”
High pricing continues to leave Zimbabwe in a hyperinflationary mode.
As previously reported by PANA, the official year-on-year inflation rate as at the end of last month grew nine percentage points to 75.86 percent, due to wanton increases in prices, from March’s 66.8 percent.
But, using the old calculation of determining the annual inflation rate in place before March, the official April 2019 annual inflation rate would be 175.326% from 166% in March.
This is the second highest inflation rate in the world after Venezuela.
The reason why businesses are sourcing foreign currency from the parallel market is mainly due to its unavailability on the official interbank forex market.
For example, beverage manufacturer Delta Corporation Limited told PANA that the interbank forex market had failed to supply them with enough foreign currency at a time when the company requires about US$7 million per month for importing raw materials.
Delta, is the largest company in Zimbabwe by market capitalisation on the main bourse.
The interbank forex market was introduced in February and was meant to reduce the foreign currency demand in the country.
However, due to the low forex rates with the current rates standing at US$1:RTGS$3,52, being offered compared to the parallel forex market this has led to more buyers than sellers of those holding foreign currency.
As such, the RTGS dollar, also introduced in February as local currency, continues to devalue as foreign currency generation remains low.
This devaluation of RTGS dollars is causing wages to be increasingly eroded to as much as five times at a time salaries remain stagnant while prices of basic goods or services increase.
On Saturday, the central bank said government through them will draw down on a US$500 million facility on Monday to supply the interbank forex market and meet the foreign currency payment requirements of business and individuals.
“This amount shall go a long way to stabilise the exchange rates and prices of goods and services in the economy,” Reserve Bank of Zimbabwe (RBZ) governor John Mangudya said.
PANA understands that the source of the money is coming from a regional Pan African Bank, but Mangudya did not reveal the name.
In his State of the Economy address last Wednesday, Finance minister Mthuli Ncube said there was about US$800 million in nostro accounts and that they needed to make sure to fine tune the market…
“…so that those monies can be released into the market and everyone can access the foreign currency through the interbank market”.
Jabangwe said the process agreed on by the businesses would then feed into the TNF (Tripartite Negotiating Forum) process once the TNF bill had been passed as law.
The TNF Bill will provide a platform for engagement, negotiating and consultation on issues of common interest relating to social and economic policy.
“Business thus urges restraint among economic agents as the state of the economy is being exacerbated by panic and speculation. Business is confident in the ability of local players to stabilise the situation for as long as we work together with the required urgency to bring about a homegrown solution,” Jabangwe said.
-0- PANA TZ/AR 19May2019
