16 April 2019

Zimbabwe: Inflation Sours As RTGs Dollar Remains Volatile

Photo: Capital FM
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Consumer prices have soured beginning of this week as inflationary pressures continue to mount amid increased RTGS Dollar volatility, 263ChatBusiness has established.

This is despite assurances from the Central Bank that the RTGS Dollar should at least have reached a point of "equilibrium" and stabilize by end of first quarter 2019.

Latest figures from the consumer watchdog, Consumer Council of Zimbabwe (CCZ) show that the cost of living for a family of six rose to RTGS $790 from RTGS $781 by end of March, with the figures expected to be much higher for the month of April.

As of this morning, the price of a loaf of bread went up by over 70 percent to RTGS $ 3.30 from RTGS $1.80.

A snap survey by this publication showed that price of mealie meal went up this week from RTGS $9. 00 for 10 kg of roller meal to an average of RTGS $13 while 750 ml of cooking oil rose for RTGS $3.80 to RTGS $5.60.

"We anticipated this, as soon as we heard that government had agreed to increase price of wheat and maize," CCZ executive director, Roselyn Siyachitema said.

"You can't make such an announcement and the market doesn't shift. We have always known our Zimbabwean market to increase their prices when they hear of an increase in any place, we expected to hear increases when the salaries of civil servants went up and it was inevitable that there would be increases," she added.

Earlier this month, Government increased salaries for civil servants amid widespread fears that the move would trigger inflation.

While food inflation continue to sour, particularly with government acceding to the recent price increases of wheat and maize, there hasn't been dialogue amongst producers, processors and the consumer bodies to streamline price adjustments to sustainable levels.

"Our shock and anxiety is that bread is a basic commodity. We have not been involved at any of the discussions from our understanding is that before basic commodities are increased there has to be a discussion, we have not been involved. If there has been a discussion made before we have not been involved, this is a very shocking thing because now you anticipate that the market does that and manufactures does that, manufactures, retailers just go out to increase prices it's going to make life difficult for consumers," Siyachitema bemoaned.

Observers have attributed the recent wave of price increases much to the increased volatility of the local RTGS currency against a stable USD.

RTGS prices on the local market are pegged against a corresponding USD parallel market value, as opposed to the official interbank rate.

By close of last week, the USD\RTGS exchange rate on the parallel market rallied firmer at 1 USD/ 4.9 RTGS despite opening this week at a slightly weaker rate of RTGS 4.7 which still remains high.

Buts it's the oscillations in exchange rate that is of great concern to analysts, if government is to restrict rising inflation.

"The country is witnessing the reemergence of hyperinflation recorded at 59.39 percent in February 2019. At this rate Zimbabwe has little chances of achieving the UN target of having not more than three percent of its population living in extreme poverty by 2030," noted economic analyst Pepukai Chivoore.

In the interim, experts expect inflation targeting to be the key focus area for the RBZ Governor, Dr John Mangudya when he tables his mid-term monetary policy later this year while he addresses the currency question in the medium term.

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