The Zimbabwean economy is and shall always be a key focus for economic case studies. Before the advent of the bond notes no one would have envisaged that this nation would go through the phases it’s been through so far. I, as most of you, do, remember the widespread abhorrence for the bond note that echoed across the nation from the onset. From a simplistic standpoint it didn’t seem plausible that a surrogate currency could just be placed at par with the USD. Well, time always has a way of revealing things and now it’s undeniably clear why the 1:1 parity was always a fallacy.
Forex Shortages Now Rampant
There have been forex shortages for a while especially with the relentless enactment of poor monetary policies. In economics, it’s always noted that bad money drives out good money. The existence of the bond will always lead to the scarcity of the much sought-after forex (USD in particular). The forex shortage woes are further exacerbated by the ever-increasing demand for the greenback. Zimbabwe is a country majorly characterised by more imports than exports due to ailing or closed industries. So you’ll find that a mere mobile phone handsets retailer needs forex to source his stock. This is the recurrent story across most business endeavours. Even most business service providers now bemoan the shortage of forex as a crippling impediment to their businesses. These shortages are also making the forex so expensive to get a hold of. All this converges into one unfavourable outcome which is the hiking of prices. Whereas some are now resorting to charging goods or services in USD to avoid having to incur further costs in later on sourcing forex. Ever since the 1:1 parity between the RTGS$ and the USD was scrapped dual pricing has been witnessed in many places. As painful as it can be to consumers it’s also a catch 22 for businesses who are looking to stay afloat.
The finance minister has tried to point many times that pricing shouldn’t be premised on forex exchange rates. That remains largely just verbal and seems unsustainable for businesses to heed that call. Interestingly, Treasury recently issued a statement about this whole USD charges debacle pertaining to government arms.
Charging In USD Disallowed For Government Departments
The finance ministry recently stated that they are aware that some government arms are tagging along in this habit of USD charging. It was pointed out that they shouldn’t charge goods or services in USD or even referencing (i.e. giving allusion to RTGS$ equivalents of forex charges). Treasury emphasised that the government is committed to providing goods and services at affordable rates. It was also pointed out that all charges or rates charged by government arms are based on cost recovery models – not profiteering.
The Treasury made it clear that all government fees, charges, and levies are still as gazetted (in RTGS$). All these were comprehensively outlined in formal communiqués that all government arms are in possession of. Hence it is folly for any government arm to review or reference charges to or in USD since this was never approved by Treasury. I’m curious to know if this warning is being heeded or it’s just a verbal call meant for window dressing. Let us know in the comments below how your experience has been in your interactions with any government department.
I do, however, feel that if the current loss in value of the RTGS$ continues it won’t be long till Treasury approves USD pricing for government arms. If the RTGS$ continue to plummet in value it’ll definitely push them to adopt USD pricing since even the cost recovery model won’t be sustainable. The statement by the finance ministry indicates that they are aware of USD pricing in other businesses outside the government. They have also demonstrated their indisposition towards curbing that practice. Thus not much enthusiasm can be derived from their warning to government arms engaged in the practice.
Charging of prices in USD or equivalent RTGS$ has increasingly become widespread. The primary aim of this is to elbow businesses against inflation and to also cushion them from price distortions. For as long as the bond (and in turn, the RTGS$) is still on the scene there’s no escaping the occurrences of USD pricing.