Galloping inflation leaves many in awe

STANDING motionless in disbelief, Mary Phiri (56) stood by and watched the shopkeeper serve other customers. As if hoping to get a different response, she asked once more: “How much is a kilogramme of salt?”

LISA TAZVIINGA

Moments later, the young man behind the counter repeats: “Gogo (Granny), I said 1kg salt costs US$0,50 or 75 bond notes (Zimbabwean dollar).”
Phiri nodded her head, realising she had heard him correctly the first time around, after all.

Slowly, she counted the bond notes in her hands — they fell short. Even though the money could barely fit in her hand, it was only ZW$56, not enough to buy a packet of salt.

She shrugged and murmured: “Ok my son, thank you.” She trudged out.To her and fellow residents of Raffingora, a small settlement located in Mashonaland West province, 60 kilometres from Chinhoyi, Zimbabwe’s soaring inflation is not a matter of abstract statistics, but a lived reality.

According to Zimbabwe National Statistics Agency (ZimStat), the year-on-year inflation rate shot up to 785,55% in May, with the depreciating Zimdollar valued at US$1:ZW$85 for cash, US$1:ZW$120 for electronic transactions although the official Reserve Bank of Zimbabwe (RBZ) rate is lagging behind at US$1:ZW$63 this week.

Phiri, a widow, stays with her daughter who has two children of her own. They usually survive on selling farm produce, but owing to poor rains, they did not harvest much this year.

“Life has become a nightmare for some of us. Before the lockdown, my daughter used to sell vegetables at the local market, but now we are just staying at home with no source of income.

“Lately, the retailers in this community have abandoned the three-tier pricing and opting for two-tier pricing whereby products are only valued in the US dollar and bond notes or RTGS value.

“As such, only those with access to US dollars are safe. For the rest of us, prices change almost on a daily basis,” she lamented.

For the past two weeks, retailers in this local community have been charging steep prices for all non-US dollar transactions. This has caused hardships to locals who used to benefit from cash discounts.

This move, necessitated by runaway inflation, has seen prices almost doubling in local currency terms. US dollar prices have, more or less, remained constant.

Moses Ngwenya, a businessman in the community, said although it was a tough call, retailers also needed to cushion themselves against rising inflation.

“It is sad that because of two-tier pricing, more and more people can barely afford to buy basic necessities, especially using the bond notes which have been heavily eroded.

“But our hands are tied, in order to secure our investment, we have to adopt the highest rate,” Ngwenya said.

In Raffingora, the Zimdollar is trading at between ZW$120 and ZW$150 to the US dollar. This is way higher than the rates in places like Harare, where it is trading at US$1 to ZW$90.

Ngwenya said most wholesalers are now pricing their products in foreign currency. This then puts pressure on retailers to also value their products in foreign currency.

Ordinary Zimbabweans have continued to suffer silently in their homes as the lockdown continues indefinitely. Faced with high levels of unemployment and low income levels, Zimbabweans face starvation in this lockdown period.

Inflation has made life unbearable for most families.

Around the country, reports of retailers and traders accepting only the newly issued ZW$10 and ZW$5 bank notes while rejecting all bond notes have become common. The recently introduced one-dollar and two-dollar coins have more-or-less been phased out. The two-dollar notes are hanging by a thread, as some retailers have already begun rejecting them.

As the value of the Zimbabwean dollar has continued plummeting against the greenback, the gap between the prices has widened significantly.

Zimbabwe officially stopped using a basket of currencies on June 24, 2019, when it banned the use of foreign currency for all domestic transactions through Statutory Instrument 142 of 2019, making the Zimbabwean dollar the sole legal tender.

However, reality on the ground suggests that the economy has been re-dollarising ever since.Even after banning the basket of currencies, the central bank lifted the ban of trading in foreign currency ostensibly to ease the financial pressures brought about by the coronavirus pandemic.

Government has also been called out for having double standards in that while it says it is promoting the use of local currency, it is charging taxes in forex.
Economic analyst and member of the RBZ’s Monetary Policy Committee Eddie Cross said the country is without doubt returning to a multi-currency system.

“What is happening is that we are returning to a multi-currency system where you can use the currency of your choice for local transactions. In technical terms, this means that if you have what are called ‘free funds’ (funds not controlled by exchange control) then you can use them legally to transact in local markets.

“The objective was to make transactions in foreign currency legal to allow people with such funds to use them in the local economy. This has resulted in an increase in the availability of hard currency for use by business,” Cross said.

He added that the Zimbabwean government is at the moment making strides to stabilise the exchange rate.“What we are trying to do now is to strengthen and stabilise the exchange rate to give people confidence in the local dollar as a store of wealth,” Cross said.

While authorities battle with currency stabilisation, it is ordinary citizens like Phiri who bear the brunt of inflation which has decimated incomes and pensions.