NO PRICE CONTROLS :CHINAMASA
Finance minister Patrick Chinamasa says government will not impose price controls, but will engage business in the face of continuing price hikes of basic goods and services.
Zimbabwe’s inflation, which broke out of negative territory last February after nearly three years, has been rising on the back of a foreign currency crisis. The country imports most of its goods after the collapse of the productive sector, anchored on agriculture, following the seizure of commercial farms over a decade ago.
A foreign currency shortage, which intensified over the past two years on a widening trade gap, has seen most businesses funding their imports using expensive cash sourced from a revived parallel forex market.
Zimbabwe, which dollarised in 2009 after its currency was decimated when hyperinflation reached 500 billion percent in December 2008, introduced a local parallel currency to ease a bank note shortage in November 2016.
The surrogate currency, pegged at parity to the United States dollar, is trading at a discount of as much as 70 percent on the parallel forex market, triggering price increases for mostly imported goods.
“It will be catastrophic for us to put price controls. So we have opted to have dialogues with them (retailers and producers) and we have discovered through these that there is no basis at all for them to hike prices,” Chinamasa said at a Zimbabwe National Roads Authority (Zinara) update meeting held in Mutare last week.
Chinamasa, however, insisted that foreign currency shortages were not driving price hikes, arguing that strategic imports such as fuel continue to get their foreign currency from government.
But trade bodies have said businesses were getting as much as half of their forex needs from the black market, as the central bank was struggling to meet demand. President Emmerson Mnangagwa, who succeeded long-serving President Robert Mugabe in November last year after the veteran politician was forced to resign under pressure from the military and his party, has made economic recovery his top priority.
Chinamasa conceded that Zimbabwe’s economy was afflicted by low levels of confidence, which the new government was working hard to resolve.
“The main illness of any economy is confidence and trust. There is no confidence (in Zimbabwe). This is why the President is working hard to restore confidence,” Chinamasa said.
He added that social-media driven speculation and rumours also had a destabilising effect on the markets.
“People need to know the implications of what they say. If you wake up and say there is a shortage when there is no such thing, you will erase what has been built for months or years in just one day,” said Chinamasa.
He made reference of the September 2017 market frenzy and price hikes, which he attributed to social media speculation.
The previous administration had introduced a separate Ministry of Cyber Security, to which Chinamasa was briefly deployed in an October 2017 reshuffle, to clamp down on social media abuse.
The ministry has since been disbanded by Mnangagwa, with the function now falling under the Information and Communication Technology ministry.