‘US$ prices to remain stable’

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THE US dollar prices of basic food and non-food commodities in Zimbabwe are expected to remain stable in the short to medium-term, a new report has said.
In its latest report on food security in the country, the Famine Early Warning Systems Network (Fewsnet) said short-lived price increases associated with the end-of-year festive season would, however, likely be witnessed for some commodities.

“Generally, US dollar prices of basic food and non-food commodities are expected to remain stable, with poor households relying mainly on informal retail shops and open markets where prices are relatively lower than formal chain supermarkets,” the report said.
In contrast to US dollar prices, prices in the domestic unit are expected to follow likely increases in formal and parallel market exchange rates.
In July and August, Zim dollar exchange rates appreciated, with a narrowing between the formal and parallel market exchange rates. However, the local currency has been depreciating since September.
At the end of October, the official and parallel markets were trading at around $5 700 and
$7 600 against the greenback, respectively, six and nine percent higher than in September.
The Zim dollar’s depreciation has also resulted in informal markets rejecting $50 banknotes, the second highest denomination in circulation.
“The bills only remain acceptable in formal chain retail shops.
“Additionally, the premiums charged for transacting in Zim dollar using mobile and electronic modes continue to increase. The depreciation of the Z$ has driven Zim dollar price increases for basic food and other commodities,” Fewsnet said.
According to Fewsnet, in October, the Zim dollar price of wheat and bread increased by 25 percent, while maize meal and rice increased by 20 and 15 percent, respectively, and sugar and cooking oil rose by nearly 5 percent.
However, most transactions in the economy are settled in the US dollar, more so in the informal sector.
“Additionally, poor households, and even some middle and better-off households, increasingly depend on informal sector retailers and open markets who price their goods cheaper and almost exclusively in US dollar.
“These retailers and open markets that pay in US dollar cash are preferentially supplied with goods by producers ahead of formal wholesalers and chain supermarkets that operate mainly on Zim dollar payments and often pay producers weeks later when the Z$ may have devalued,” Fewsnet said.
At the end of October, the government extended the deadline for the multi-currency regime by five years to December 2030.
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