Zimbabwe: Foreign Currency Auction System Stabilises Prices

3 August 2020

Prices of most commodities have started to stabilise three weeks into the foreign currency auction system with Government confirming an improved availability of products on the market.

The Reserve Bank of Zimbabwe replaced the interbank market with weekly foreign exchange auctions in June to determine the Zimbabwe dollar exchange rate with those in industry and commerce and also to improve transparency and efficiency in trading of forex in the country.

The move was also meant to discourage the parallel market.

It is hoped that small players will also be able to participate in the foreign currency auction system to allow continued stability in the prices of goods, including the basic commodities.

The Ministry of Industry and Commerce's recent report indicated that prices of most products, especially chickens, economy beef, bath soaps, eggs, flour, vegetables such as cabbages and tomatoes had stabilised.

According to the ministry's report, the market has also witnessed a decline in prices of bread which had spiked to $70 beginning of July 2020 to around $66 per standard loaf.

Cooking oil that had gone up to above $300 per 2-litre bottle has declined to an average of $240-$250.

"The price of sugar which had gone from $66 per 2kg packet to an average of $200 has now stabilised," reads the report.

Industry and Commerce Minister Sekai Nzenza said availability of products had improved on the market and the ministry would continue to monitor the situation.

"Prices of most goods, including the 14 basic commodities have been spiralling upward especially after the introduction of the national lockdown due to the Covid-19 pandemic as witnessed from the surveys conducted by the ministry."

She said prices of most monitored products had shot up to an extent that they were now out of reach of average consumers.

Products such as laundry soap which was pegged at $52 beginning of April had increased to above $120 by end of June but had now stabilised.

The price of a 2-litre bottle of cooking oil which was pegged at an average $185 end of April had increased to $250 by end of June.

A loaf of bread had increased from $36 in April to $67 by end of June as millers attributed the price increase to shortage of flour.

Since then, the prices of bread have not changed.

Confederation of Zimbabwe Retailers (CZR) president Denford Mutashu yesterday confirmed that prices had stabilised following the introduction of the auction system.

He said the system had also improved access and availability of foreign currency to manufacturers of basic commodities.

"Product availability has improved quite tremendously owing to the availability of foreign currency at auction by the key manufacturers and currently prices have not moved significantly as was the case two months ago.

"Stability is a result of foreign currency availability at the auction floor. The bulk of the bids at the foreign currency auction system have been snapped by manufacturers as well as retail and distribution so that is encouraging because the hustles of sourcing foreign currency has declined," he said.

Mr Mutashu urged the Government through the Reserve Bank of Zimbabwe to ensure a continuous supply of foreign currency on the auction system to enable the manufacturing sector to function.

"We are happy the auction system so far as it has brought stability in pricing, it is bringing stability in supply.

"When supply improves across sectors in terms of the key basics there is competition and this may force prices to be on the decline and in this particular case, a closer example is the bread situation," he said.

Economist Mr Eddie Cross said the system has brought significant change in the production sector.

"The majority of the productive sector applications have been funded and this has made dramatic impact on the industrial sector, which has seen a steep drop in the level of the cost of procuring raw materials.

"We funded all maize imports, soya bean imports, cooking oil imports, and imports of basic food production, gas, and the requirements of spare parts of motor vehicles.

"In all these specific areas, its making a significant contribution."

He, however, said the challenge at the moment is the non-participation of banks in the system.

"Our biggest challenge at the moment is to get banks to participate and increase volume of foreign exchange on the market and that is not happening, that is the biggest disappointment."

A survey conducted by The Herald in most retail shops in Harare has shown that prices of basics had stabilised.

In most supermarkets, a 2kg packet of brown sugar is selling for $212,79 while white sugar is going for $224, 99.

Cooking oil is ranging between $239 and $273 per 2-litre bottle while some shops had slightly slashed 2kg rice priced from between $280 and $299 to between $186 and $194.

Laundry soap has maintained its price pegged at between $114 and $149 per bar, depending on the type, for the past three weeks.

Also, there has been no changes in bread price for the past three weeks, with a standard loaf of bread selling between $68 and $70.

More From: The Herald

Don't Miss

AllAfrica publishes around 900 reports a day from more than 140 news organizations and over 500 other institutions and individuals, representing a diversity of positions on every topic. We publish news and views ranging from vigorous opponents of governments to government publications and spokespersons. Publishers named above each report are responsible for their own content, which AllAfrica does not have the legal right to edit or correct.

Articles and commentaries that identify allAfrica.com as the publisher are produced or commissioned by AllAfrica. To address comments or complaints, please Contact us.