Ivan Zhakata-Herald Correspondent
LOCAL currency stability has led to the continued reduction of many prices of basic goods.
There was a major fall in the cost of living last month with the month-on-month inflation at minus 15 percent largely driven by a fall of more than 30 percent in the prices of food and non-alcoholic drinks, although prices of most other goods remained constant.
The Consumer Council of Zimbabwe has confirmed the “stickiness” of some prices of essential goods and services and believes that all suppliers who pushed up their prices, or fees when the exchange rate movements showed that the Zimbabwe dollar was losing value should be adjusting downwards as the Zimbabwe dollar gains value.
The dramatic fall in official exchange rates from late June and into July, after a surge in May and for much of June, triggered the decrease in prices of some goods, or at least some brands of some goods, and since then more manufacturers have been following suit.
The fall in exchange rates and the present stability in rates followed major reforms by the Government through the Ministry of Finance and Economic Development and the Reserve Bank of Zimbabwe. First the amount of local currency in circulation was effectively capped when the Finance Ministry took over the payments to exporters when they sold a quarter of their export earnings as required.
The second reform saw all wholesale auctions for banks requiring foreign currency for their clients having more foreign currency on sale than the banks could buy using local currency.
At the same time as sorting out the fundamentals, Government went after speculative exchange rate manipulators who were previously fuelling unjustified black market volatility that eroded the value of the local currency. With the banks taking over the allocations of foreign currency to net importers, the black market has now been cut down to a small sideshow, with almost everyone in the formal economy able to buy their needs from their bank.
Consumer Council of Zimbabwe (CCZ) executive director Mrs Rosemary Mpofu said the lowering of prices confirms the responsiveness of the market to the policy measures which were implemented by Government to stabilise the local currency.
While food prices were generally falling between the end of June and the end of July, there were actual increases in some of the other essential goods and services, especially in health when this was measured in local currency. As a result the monthly basket of essential goods and services crept up slightly over July.
“The cost of living in Zimbabwe is measured in the local currency by the Consumer Council of Zimbabwe’s low income urban in a monthly basket for a family of six increased but at a decreasing rate from the June figure of $2 567 480 to July $2 687 018 by July 31,” she said.
“The deceleration confirms the responsiveness of the market to the policy measures which were implemented by Government to stabilize the local currency. In particular, this basket has marginally rose by 4.7 percent from $2.5 million to $2.6 million.
The main driver to the basket were utilities including water and rates, electricity and rentals. Health was also another significant shaker to the basket as it rose by 135 percent in local currency. In United States dollar terms converted at the supermarket rate, which is the official rate with a 10 percent premium, the basket increased by 24.5 percent from US$434.36 to US540.76 during the same period.
Mrs Mpofu said suppliers should adjust their prices according to the movements in the exchange rate to maintain price stability.
“However, generally when we look at the basket for the month of July 2023 we realise that the price of most basic commodities went down in the month under review,” she said.
“This includes things like cooking oil, beef, clothing and footwear, fresh milk and bath soap, among many other basic commodities. The Consumer Council of Zimbabwe has however noted with concern that the price movements in most retail shops have not been proportionate to the local appreciation in the Zimbabwe dollar experienced in July 2023.
“It is expected that the suppliers should adjust their prices according to the movements in the exchange rate in similar fashion. In short, prices should also decrease at a faster rate to match the exchange rate movements.”