‘High demand spurs price increases’

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RESERVE Bank of Zimbabwe (RBZ) governor John Mangudya says the recent uptick in demand for goods is spurring price increases, as businesses capitalise on arbitrage opportunities.

This comes after public concerns that the current pricing regime was not in tandem with the prevailing “stability” as the Zimbabwean dollar is holding steady against the United States dollar.
“We have seen that the economy is not doing very badly. The reason why people are increasing prices is because of demand, if there is no demand, businesses will not increase prices,” Mangudya told officials at a Zimbabwe National Chamber of Commerce business conference in Harare last week.

He said local businesses were used to high prices, adding that it would take time for prices to stabilise as the country transitions from a phase of hyperinflation to stabilisation. Despite inflation figures having gone down by almost half to 471, 25 percent, prices have remained excessively high in relation to incomes.

Mangudya said there was a need for the country to increase production to support the current “stability” to enable prices of commodities to go down. The central bank governor, however, bemoaned the recent tariff increases for public utilities, saying this had a serious effect on the general economic stability. This comes after the Zimbabwe National Roads Administration recently increased tollgate fees for light motor vehicles by more than 100 percent from $45 to $120.

“Yes, the pricing of public utilities is also … of great concern. We have advised the government; we have advised the minister of Finance that we need to be responsible when it comes to public utilities because the way the figures go up appears like there is no relationship with the rest of the products.

“To increase the price by 120 percent in an economy where inflation is 5 percent and below, month-on-month, is not being responsible.
“We, as advisors to the government, have advised the same line and have said it because we do not want to lose stability because of prices of public utilities. We would be shooting ourselves in the foot,” he said.
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