Forex shortages spur price hikes in Zimbabwe

Published: 07 September 2017

CHALLENGES faced by retailers in securing foreign currency to import products, especially commodities local industry is not able to produce, have resulted in sporadic price increases that have put pressure on inflation, Confederation of Zimbabwe Retailers President Denford Mutashu said yesterday.

Mr Mutashu said retailers had recently resorted to sourcing foreign currency on the black market, as the Reserve Bank of Zimbabwe struggled to provide enough hard currency to retailers and non manufacturer distributors to import. Mr Mutashu said the impact of the acute shortage of hard currency had started resulting in price increases in certain products, though sporadic, as importers and manufacturers had little choice but to pass on the cost of the currency premiums on to the customers who he said bore the brunt of the challenges.

"Ultimately, the consumer is one of hit hardest in this whole matrix because they do not have any choice, but one good thing is that most goods are still stocked up in supermarkets and we have not experienced shortages although certain lines are in short supply due to overwhelming demand," he said. Mr Mutashu said the confederation had been going around the country visiting suppliers and manufacturers and in one instance they noted that a rice distributor had stopped the machines, as workers protested delayed payments, caused by challenges the business faced in securing forex to run smoothly.

Analysts say that as Zimbabwe is largely dependent on imports, whether via legitimate routes or clandestinely, demand for foreign exchange is likely to rise forcing pressure up exchange rates (8 percent on bond to the US$, 35 percent on transfer to the US$ and slightly more for Ecocash). But instead of too much money chasing too few goods as was the case in 2008, even if the drip-feed system of currency supply is observed, inflation will creep in because of import demands.

This will shift money mostly into the hands of importers, whether informal/irregular cross-border traders or big corporations as they seek to replenish supplies. Ultimately, the poorer will have less access to even those bond notes whose value will be compromised by exchange rate pressures, forcing the RBZ to loosen its control on how much is injected into the economy.
- the herald