By A Correspondent- Galloping prices of basic commodities, which were experienced in the past week, were caused by big companies that injected cash on the parallel market causing volatility in the exchange rate, but corrective measures by Government have yielded instant results, Industry and Commerce Minister Mangaliso Ndlovu has said.
Minister Ndlovu said Government will not hesitate to descend on businesses found on the wrong side of the law.
Pressure continued to mount on retailers to downwardly review prices as the parallel market exchange rate tumbled to between $13,5 to $14 to the US dollar by end of day yesterday.They had previously risen to a peak of $22 by Thursday.
“There is nothing that has been driving prices save for the (parallel) exchange rate and because of certain activities that were taking place in the market. I think there was excess liquidity being injected into the black market, which pushed rates even higher than the official interbank exchange rates,” he said.
Government, he added, acted quickly to contain the situation by putting some measures through banks.
“However, prices take time to adjust, but it is really unfortunate because we cannot have rates being driven like that, to the extent that it affects the whole economy…I believe corrective measures by Government have given us almost instant results.”
Some businesses wantonly raised prices on account of the volatility of the exchange rate.
Addressing the nation shortly before flying to New York for the United Nations General Assembly (UNGA) on Friday night, President Mnangagwa expressed concern over soaring prices of basic products.
“Government continues to be concerned about the escalation in prices of basic commodities. While, we concede that the new monetary measures and the drought may have contributed to the current price movements, we do not believe such movements are justified in all cases.
“We have observed with increasing concern a tendency within the business sector to randomly increase prices without reason or cause, except that of greedy profiteering,” he said.
The Reserve Bank of Zimbabwe (RBZ) swiftly intervened after it issued a directive to freeze transactions of all accounts involving Sakunda, Access Finance, Spartan Security, Croco Motors and related entities.
Finance and Economic Development Minister Professor Mthuli Ncube argues that the actual rate should be around 1: 5,6 to the US dollar, but arbitrage and speculative activities have been distorting rates.
“There are several limitations both conceptual and concerning the availability of data, when trying to establish the appropriate exchange rate for Zimbabwe.
“It quantifies the Zimbabwe dollar exchange rate based on the real exchange rate with South Africa, deriving the normal exchange rate that would keep real purchasing power of the currencies at 2011 levels, a year of relative macroeconomic balance.
“For August 2019, the most recent period for which the necessary data is available, this suggests a nominal exchange rate of about $5:6 per US dollar,” he said.-StateMedia