IN an environment where transactions are increasingly dependent on the parallel market rate, the cost of a US dollar rose by more than 3 200% in August against the defenceless dollar as high inflation persisted against depressed production.
The current situation has shown that Reserve Bank Governor Gideon Gono only managed to ease the symptoms when he removed 10 zeros from the currency rather than the root cause of the economic crisis.
As parallel market rates determine the selling prices of goods and services, they are dictating the more immediate changes in the rate of inflation.
However, the wide range of shortages that are adding to the pace of inflation can be traced directly back to deliberate policies that are still being defended and even reinforced in spite of their evidently disastrous consequences.
Economic analysts this week said as long as there was no production, the dollar would continue to lose value against major trading partners, while monetary authorities would continue fighting “returning zeros”.
University of Zimbabwe business school lecturer Tony Hawkins: “We are looking at a situation whereby the (US) dollarisation of the economy is going to increase, because our own money would have become worthless.”
Governmentâ€™s belief that complete acceptance of its regulated official inter-bank exchange rate would help bring inflation under control has amounted to no more than a shallow attempt to deny the existence of the distortions, imbalances and scarcities that their policies have caused.
The stalled dialogue between the countryâ€™s political players is seen as the best way forward as long as there is sincerity from all stakeholders.
Economic consultant John Robertson said events in August have confirmed the views of the realists that nothing of importance had been achieved.
“In August, all scarcities that had been doing the damage remained firmly in place,” said Robertson.
He said these were made even more serious by governmentâ€™s enthusiasm for generating money to spend, while it completely lacked the ability to create goods to spend it on. To make things worse, he added, it kept in place the price controls that have prevented those who have that ability from getting back to work.
“The population has remained poorly supplied, with prices of many goods beyond the reach of most consumers and, as more people lose their formal sector jobs, more are being forced to live by their intelligence, go hungry or emigrate,” he said.
A survey by businessdigest this week showed that prices of all goods and services had increased nearly five fold over the past month.
The increase however is not “visible enough” because of the removal of the zeros.
Government determination to keep persuading the public that the rising prices are the fault of the business sector appears to be its main reason for keeping in place the price controls.
“It is the shrinkage of the value of the Zimbabwe dollar that has caused prices to rise and governmentâ€™s effort to claim the opposite is dishonest in the extreme. Scarcities have played their part, and all of these can also be linked to political policy choices, but governmentâ€™s decision to simply print the money that was formerly collected from taxpayers or borrowed from institutional lenders has become the more important cause of the problem,” said Robertson.
Robertson said the US dollar could cost as much as $50 million by the end of the year. Before ten zeros were removed, the parallel market rate was about $5 million.
“If we do not change course, we will get there again in November,” he said.
By Paul Nyakazeya