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Zimbabwe currency speculators cornered? – Bulawayo24 News

THE Retreat of the recent inflation spiral is expected to accelerate, and Purchasing power increase in light of recent pay rises without matching price rises, as speculative market forces are being contained by tough corrective macro-economic measures being adopted by the Government, Finance and Economic Development Minister, Professor Mthuli Ncube, has said.

This comes as continued downward review of fuel prices, coupled with tightening of money supply have started fostering market stability, with the Consumer Council of Zimbabwe (CCZ) crediting this for the stability and potential gradual decline in the cost of living.

For the past few weeks, the country has experienced a relatively stable exchange rate and pricing stability with illegal money Dealers now struggling to access cheap Zimbabwe dollar supplies.

The introduction of gold coins as an alternative store of value, the bulk of which have been sold in local currency, has removed a lot of Surplus local currency from the banking system, easing the pressure on the US dollar, whose demand has been driving exchange rate volatility, economic experts have said.

Just last week, the Government directed immediate suspension of current payments to contractors by ministries, State agencies and departments until the invoiced amounts can be certified by the ministry permanent Secretaries as being calculated through the interbank rate, not the black market rates.

Going forward, Treasury approvals and thorough due diligence will be required as authorities close all leaks fueling parallel market activity and resulting inflationary pressures.

Prof Ncube said these domestic measures will quickly arrest inflation with positive resulting impact in the form of enhanced disposable incomes and aggregate demand for businesses.

“We’re beginning to see the month-on-month inflation beginning to dip and the exchange rate beginning to hold where it is and that’s a good thing. We need that stability for us to focus on development,” said the minister in an interview on the side-lines of the Zimbabwe Economic Development Conference, which ended in Victoria Falls on Friday.

Already, the Zimbabwe National Statistics Agency (Zimstat), has reported that the country’s month-on-month inflation rate dropped to 25.6 percent in July, shedding 5.1 percentage points on the June rate of 30.7 percent although annual inflation stands at 256.9 percent as this looks at the changes over the last 12 months, and so cannot measure trends, just the final result.

This corresponds with the CCZ report that the cost of living for a family of six decreased by $742.37 in the week ending August 5, indicating the cooling down impact of the policy measures and drop in fuel prices, which are a major cost driver.

By the end of July, the cost of the basket used by the consumer council was calculated at $281,062.83, but CCZ says this has now dropped by 0.26 percent to stand at $280,330.46. The ZimStat monthly inflation figure for August, calculated from a far larger basket of goods and services has yet to be announced but is widely expected to show a Massive drop from the July figure and could even show a tiny negative rate like the consumer council’s figure.

“Indeed, the increase in inflation was really beginning to erode Purchasing power, incomes and demand for ordinary citizens. So, the dipping on monthly inflation downwards will go a long way to Restore value to citizens’ Purchasing power, and lower the cost of living once again,” Prof Ncube stated.

“All this is critical in beginning to improve savings and may even encourage investments. So, all this is going in the right direction in terms of restoring Purchasing power for all citizens.”

Concurring with President Mnangagwa, who earlier chided speculative market behavior and castigated profiteering businesses, Prof Ncube said it was important for Zimbabweans to understand what has been driving the cost of living or inflation in Zimbabwe and critically assess the corrective actions that have been taken by the Government.

“One of the factors that has been impacting the cost of living in the economy is imported inflation, which has been coming through via the price of fuel but also through the price of other goods and raw materials such as fertilizer and so forth,” he explained.

“But also, domestically, we have inflation being brought about by the weakness in volatility in the currency. So, what have we done about all this?

“On foreign or external factors rather, we have had a situation whereby overall FOB price of fuel has been coming down. We too as the Government have responded by adjusting the levy on fuel accordingly to make sure that Wherever there is a sharp increase, that increase is capped and so forth, and we have seen a downward trend and general stability in the fuel prices. That’s one factor that has helped stabilize inflation and cost of living,” said the minister.

Furthermore, they said the Government’s blending program around petrol has been very helpful. Currently, the country blends up to 20 percent using ethanol and that again has helped “cap the sharp increase in fuel that we consume”, he said.

“Then on the domestic front, in terms of domestic factors, which is mainly the currency, we have worked very hard to curb speculative activity.

“First of all, we have made it very expensive for speculators by raising the domestic interest and the policy rate is now at 200 percent. We feel this is beginning to bite someone just to make sure that it’s difficult to speculate. It shouldn’t be easy money,” said Prof Ncube.

“Before that we had negative interest, basically we had free money but right now we don’t have free money anymore, now money is costly.”

Again, the minister said the Government has become very firm in terms of pricing policy, especially with regards to procurement and payment of contractors for public goods and services.

“We are introducing this value for money process enacted and implemented by the Value for Money Unit, which the Government has established to make sure that, you know, we get the value for money,” he said.

“All the overpricing, forward pricing in terms of using a very high exchange rate, that has got to stop and we have come hard on that.

“As I speak, we have actually suspended all payments by the Government to all service providers currently until we get some validation that the prices are within reasonable grounds. Some of the prices are actually crazy for a fact and that’s on area where we have instituted measures.”

Prof Ncube said Government was also implementing wider measures to deal with market indiscipline to make sure that those who deviate are adequately punished or sanctioned for economic misdeeds.

“There is a lot that we are doing and we have made sure that either we are tackling domestic factors or acting on external factors and those together have gone a long way in beginning stabilizing inflation and the exchange rate,” he said.

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