HomeBusiness DigestPrice controls abolished

Price controls abolished

Eric Chiriga

GOVERNMENT yesterday abolished price controls that were interfering with market forces and wrecking havoc on the economy.

if”>The Minister of Finance, Herbert Murerwa, said the controls were causing distortions in the market and that the pricing system for all goods and services will now be market-driven to eliminate parallel market dealings.

Murerwa said distortions in the market had arisen from price controls.

He said the price controls had contributed to the shortages of basic commodities on the open market with the same goods resurfacing on the parallel market.

“It will, therefore, be critical that market-pricing mechanisms be embraced, which are central to ensuring the viability of industry as well as the well being of consumers,” Murerwa said.

But Murerwa insisted that subsidies and safety nets would be essential to protect targeted vulnerable groups.

He said the removal of the producer and selling price distortions especially for agricultural commodities and fuel will result in the efficient and effective utilisation of resources.

“Government departments will therefore levy economic prices for their services,” Murerwa said.

Last year the government introduced price controls in a failed bid to cushion consumers from galloping inflation. But these controls created serious shortages of products.

Controls also created viability problems in manufacturing firms as the government-imposed prices failed to cover the production costs or at allow manufacturers to break even.

Murerwa said the government would offer post- harvest producer prices that allow farming to become viable.

“This will enable farmers to cover their costs of production, be self-sufficient and to re-invest in agricultural production.”

He said the sustainability of such post harvest producer prices would require that the selling prices of the Grain Marketing Board (GMB) be at break even thresholds for maize and wheat.

Murerwa said GMB will continue to play its central role in the management of the national strategic grain reserves but the government will put in place administrative arrangements to facilitate the marketing of grain by private sector contract growers in order to reduce transaction costs.

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