Zimbabwean Dollar Faces Disappearance as Economy Continues to Tank
Zimbabwe’s economy has struggled for several years, damaged mostly by crippling international sanctions and, costs of living for ordinary Zimbabweans are skyrocketing as the country grapples with one of the worst economic crises, compounded by galloping inflation as prices of basic commodities soar disproportionately.
As the local currency continues to tumble, official annual inflation has been pushed to 785.6%.
Fuel /basic commodities/healthcare increases
Over the past few weeks prices of commodities have trebled as well as fuel which has been increased by over 150%. This is even though fuel is scarce and where available is being sold mainly in US currency.
Government through fuel regulatory body, the Zimbabwe Energy Regulatory Authority (ZERA) recently announced a dual pricing model, which saw the price of diesel shooting up from ZW$24,90 to ZW$62,77 while the US dollar price was pegged at US $1,09 per litre. Petrol price per litre was hiked from ZW$28,90 to ZW$71,62 or US$1,28 per litre.
This has made the prices more expensive than in most countries in the region.
Motorists now sleep in their cars parked at service stations that are still selling in local currency. The fuel price hike has had a ripple effect with prices for other basic commodities going up as well.
A loaf of bread which was about ZW$3,40 in January is now pegged at ZW$75 making it beyond reach for most people largely civil servants who earn between ZW$2500- ZW$4000 per month. This is coming at a time the poverty datum line is now around ZW$8000.
A survey by Timescape revealed that leading supermarkets like Pick and Pay, Ok, Choppies were pricing their goods according to the US rate on the black market.
"Most of us are earning in local currency but the prices are chasing after US$ rate," Mercy Chirawu who survives by vending said.
Most shops in Zimbabwe are now displaying prices in both local dollar and US$ currencies raising fears that the country was re-dollarizing. Even vendors are now selling their wares in US$ with many rejecting the local currency.
Cosmas Mazenge runs a small tuck-shop in downtown Harare. "I have stopped accepting the local bond notes because where I get my supplies, they no longer want it," he said.
UN aid agencies have alerted that majority of the population, around 7.7 million people, representing half of the country’s population needed food assistance.
Healthcare is also one sector which is now out of reach for many Zimbabweans. Because public facilities have no equipment, drugs, personnel, many people are forced to seek out private facilities. However, these have also increased their fares and the hardest hit are pregnant women and those requiring surgery.
For pregnant patients in Zimbabwe, they will have to dig deeper into their pockets to pay for maternity fees which are ranging from between US$350 and US$1500 in private facilities. Salaries for many are in local currencies and are less than US40 per month.
The hardship and deepening poverty have spurred discontent among ordinary people with health workers downing tools and refusing to go back to work until their salaries are pegged in US $ or equivalent. Patients are being turned back without being treated including pregnant women as there are no nurses.
Teachers unions have also warned that if they are not provided with protective clothing and a risk allowance when schools open at the end of the month of July, they will not report for work.
The desperate government through Finance Minister, Mthuli Nucbe has unleashed a raft of policies which have been however shot down by business analysts. The Finance Ministry through the Reserve Bank of Zimbabwe (RBZ) introduced a foreign currency auction trading system in a bid to bring normalcy to the free-falling local currency.
"The adoption of a Foreign Currency Auction System is expected to bring transparency and efficiency in the trading of foreign currency in the economy," the Finance Minister.
Meantime, Former Finance Minister, Tendai Biti said dollarization without productivity and scrapping of export surrender requirements was “a waste of time".
"The RBZ’s quasi fiscal activities must be proscribed and there must be full transparency and disclosure of market players to avoid cartels capturing an entire market,” Mr. Biti shot.
In yet another desperate attempt to rescue the situation, the government suspended all mobile money transactions Friday June 26, the most widely used platform to make and receive payments.
Its explanation was that the measure was meant "To deal with malpractice, criminality and economic sabotage".
The black-market forex traders were using the platforms to conduct business.
However, the largest operator EcoCash, defied the order, urging its more than 10 million users to continue transacting.
Zimbabwe has been facing crippling international economic sanctions by the main industrial countries of the West for a long time. The measures were put in place to punish late President Mugabe for seizing fertile land from White British Farmers who stayed back after the end of colonial rule and handing them to locals.