THE Reserve Bank of Zimbabwe (RBZ) this week blamed business for forcing consumers to trade in United States dollars by manipulating prices, marking a fresh phase in the country’s battle to address a price rage that has frustrated recovery.
RBZ governor John Mangudya led a sustained campaign to bring business to order in October after black market kingpins took over markets with deadly consequences.
However, little was achieved.
On Wednesday, the central bank chief said with business behaving in a progressive manner, Zimbabwe had enough local currency stocks to trade without relying on foreign currency.
“The country’s monetary system is largely constituted of local currency, with 56% of banking sector deposits being local currency, with the balance of 44% being foreign currency,” the RBZ governor said.
“In this regard, the current practice by business of competing for foreign currency sales through using a penal exchange rate to discourage consumers from paying in local currency is punishing consumers and stoking adverse inflationary pressures, which is detrimental to the economy at large,” he said.
Prices have rocketed in the past few weeks, continuing from the October rage, which forced the RBZ to deploy Financial Intelligence Unit (FIU) investigators to hunt down delinquents.
A spate of arrests followed, but business pleaded with him to hold his guns.
The RBZ’s statement this week followed a review of the October meeting, where a series of actions to arrest price hikes were agreed.
This week, analysts said the foreign currency crisis would force companies to continue factoring in parallel market rates in their pricing models.
State firms offering critical services like the Zimbabwe Electricity Transmission and Distribution Company have also hiked prices.
The power distributor announced a 12,3% electricity tariff increase two weeks ago.
The new charges will see domestic consumers on pre-paid meters forking out ZWL$1 265,11 to buy 200 units of electricity per month, a price that is way above the reach of many Zimbabwean households.
On Tuesday, the Grain Millers Association said flour prices had increased, explaining why there has been a wave of bread price increases recently.
The price of flour has gone up by 6,5% from ZWL$112 000 to ZWL$119 000 per metric tonne.
The price of bread has increased by 15% from ZWL$175 at the end of last year to ZWL$210 lately.
It has been a difficult first few weeks of the year, which have also seen major funeral service providers, Nyaradzo Funeral Services, announcing a 180% premium increase in line with the market wide price rage.
Labour and Economic Development Research Institute of Zimbabwe economist Prosper Chitambara raised fears of a gloomy outlook.
“This year we are anticipating that public spending is going to increase because of the need to fund by-elections, depending on how that is going to be financed. If that is going to be financed through creation of money, obviously that is going to create inflationary pressures within the economy,” he said.