The past few days have seen a lot of local developments in the economic sector. We have seen an increase in internet data charges, we have seen mobile service providers like Econet increasing tariffs for local voice calls. ZESA has also come out insisting that they need a 30% tariff increase so as to operate sustainably. All these developments have been fuelled by the Money Policy Statement in which the RBZ Governor introduced the freely floating RTGS$ which commenced trade against the US dollar a 1:2.5 rate. As noted that the RTGS$ is actually weakening. This has given businesses & service providers the excuse to increase prices on the pretext of realigning their prices to the dictates of the MPS. Here are some of the most recent developments:
Tobacco Farmers Exempted From The 2% Tax
Since the beginning of the tobacco selling season there had been a serious withholding of the crop by farmers owing to the 2% tax, among other issues. This saw the Finance Minister issuing an announcement that the 2% tax would be scrapped for all transactions pertaining to funds transfer amongst farmers, buyers, contractors and the auction floors. Farmers started bringing their crop to the floors. While some may claim this is a reaction to the scrapping of the 2% it’s important to also consider that the farmers simply must sell their crop to meet obligations, time has never been on their side.
Year-On-Year Inflation Projected To Increase To 70%
According to Trading Economics, the year-on-year inflate rate climaxed at 59.39% by the time we got to mid-March. The highest annual inflation rate since the end of 2009. However, it is projected that by sometime later this month, the year-on-year inflation is going to surge to 70%. The rating of the USD against the RTGS$ has seen a general increase in the prices of basic commodities. The Interbank rate has also fuelled a sharp increase in the prices of housing & basic utility services. This is because prices have been adjusted to that rate which in essence constitutes an increase in prices. This has resulted in a spike in inflation for housing & utilities, which had previously been very low.
Least Paid Civil Servant To Get ZWL$13000
The government recent enacted wage increases for civil servants spanning from 13 % to 29% across the various grades. Ideally, what the Finance Minister said is that the highest paid will get a 13% increment whilst the lowest paid will get a 29% increment. This translates into the lowest paid civil servant now getting ZWL$13000 – which is USD150 supposing we use a black market exchange rate of 1:4. Some retailers have already pegged RTGS$ prices using black market rates. The wages will be reviewed again towards mid-year.
Finance Minister’s Recent Comments On Price Increases
During the formal announcement of the salaries review for the public service Professor Mthuli made comments regarding price increases. He said it is not correct and is bad economics to link price increases to exchange rates. He emphasized that price increases should be driven by concerns about inflation trends. Essentially, he highlighted that prices must be determined by inflation rates (i.e. the typical cost of a consumption basket) rather than exchange rates. He explained that when someone receives their salary the first thing they do isn’t to look for forex; rather they just go straight to purchase what they want. He was buttressing his point of how incorrect it is to placate prices using the exchange rate. He also pointed out that month-on-month inflation has actually been decreasing. Though his submissions make ideal or academic sense the sad reality on the ground is that businesses and individuals have real needs that have not been addressed.
Standard Chartered Bank Hikes Bank Charges & Institutes Charges For Soiled Notes
The bank recently announced changes in its bank charges regime – the first bank to actually do so. Account maintenance has been increased from RTGS$5 to RTGS$9, whilst a ZimSwitch POS transaction will now be charged RTGS$0.85 (up from RTGS$0.45) for every transaction above RTGS$10. Bank to Ecocash Wallet transfer will now see RTGS$3 (up from RTGS$2) being charged for every transfer above ZWL$1300. The service fee will now be RTGS$0.99 per transaction – a 230% increase from RTGS$0.30.
They have also introduced a 10% charge for any deposit of soiled USD notes. This has sparked widespread outrage from people querying why they have to be charged for soiled notes. Come to think of it it’s inevitable for some USD notes to be soiled considering that most of them have been in circulation for years – since we don’t print or mint the notes.
The painful outcomes of most of the recent developments are the further exacerbation of poverty levels amongst Zimbabweans. The irony of it is that the ones deciding and instituting most of these changes are immune from their negative effects. The general consensus is that the reforms being put into place are simply addressing symptoms of the problem. People still feel that government expenditure is unchecked and that the bond by whatever name must go. The absence of our own local currency due to an ailing industry which is causing imports to outweigh exports is the real problem. Thus, for as long as that isn’t confronted head-on any efforts applied will simply be to manage the problem but not address it per se.