Anxiety grips market | Business Times

LIVINGSTONE MARUFU

Anxiety has engulfed the market as Zimbabwe’s already precarious economy is plagued by a slew of  problems, including the  skyrocketing prices of goods,runaway exchange rate on the parallel market that many businesses use to price their products, and a spike in inflation,  among many other problems.

Exacerbating the situation, the market is waiting impatiently for the Reserve Bank of Zimbabwe  (RBZ) to unveil its crucial  mid term  monetary policy statement amid mounting pressure to stabilise  prices of goods in the market as the Zimbabwe Gold (ZiG) continues to lose value against the greenback and other major currencies.

Zimbabwe’s exchange rate yesterday stood at around ZWG 13.81: US$1 from ZWG 13.70 in June.

On the parallel market, it is currently trading at ZWG28: US$1 from ZWG18:US$1 in June.

Zimbabwe’s month-on-month inflation rate  for the month of August, according to official data released by the Zimbabwe National Statistics Agency (ZIMSTAT)   this week  climbed to 0.4% from July 2024 rate of -0.1%, while  the US$ inflation rate for the period was 0, 2% gaining 0.3 percentage points on the July 2024 rate of -0.1%.

Annual inflation rate for August also climbed to 1.4%, reflecting a gain of 1.5 percentage points from the -0.1% registered in July.

This increase indicates a rise in the cost of goods and services.

Due to this, there is now more anxiety in the market, which has put people and businesses on edge.

Economist, Persistence Gwanyanya, who is also a member of the Reserve Bank of Zimbabwe’s Monetary Policy Committee, told Business  Times,  a market leader in business, financial and economic reportage,  that  the primary drivers  of inflation were  the devaluation of  ZiG and the acute shortage of forex.

“The slight increase in inflation is largely reflective of currency depreciation during the review period on account of increase in ZiG monetary aggregates. Given the structural weakness of the interbank market, which tends to be a seller’s market where RBZ seems to be the only supplier of forex with the rest of participants seeking to buy the same, the central bank should normalise interventions by injecting forex in the interbank market every time the market seems off balance. In any case that’s the essence of reserves,” Gwanyanya said.

Another   economist, Vince Musewe, weighed in saying: “Inflationary pressures will always be present especially as the market values the ZiG downwards. Add other related costs such as energy; it means prices will always be under pressure.”

Consumer Council of Zimbabwe CEO, Rose Mpofu expressed disquiet over price hikes of basic goods.

“…through our daily market survey, we have witnessed the increase in prices of basic goods, in particular, over the last two weeks,” Mpofu said.

She added: “As measured by the Consumer Council of Zimbabwe’s low-income urban earner monthly basket for a family of six, the cost of living measured in the local currency (ZWG) increased by 3.46% from ZWG 7 839.21 to ZWG8 110.30 between June and July 2024.

“In US$ terms, the basket increased marginally by 1.88% from US$549.82 to US$560.16 during the same period.

(We have also noted that) confidence in the new currency is still lacking. Efforts still need be directed towards closing a knowledge gap especially in the informal sector as well as the country’s remote areas regarding the new currency partly due to previous experiences with changing currencies.”

The inflation figures, according to RBZ governor Dr. John Mushayavanhu, continue to be well within the economy’s and the central bank’s forecasts.

“The inflation figures are testimony to the fact that the introduction of ZiG has resulted in price and exchange rate stability. We are not going into deflation, and our monetary policy statement projects that ZiG inflation will end the year at between 2%  and 5% , with the International Monetary Fund projecting 7% as per their recent statement,” Dr Mushayavanhu said.

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