Basic principles of economics to diagonise price hike

THE price hikes being experienced in Zimbabwe could be easily diagnosed by the basic principles of economics, the Confederation of Zimbabwe Retailers (CZR) has said.
Zimbabwe has been experiencing price hikes on basic commodities since September last year as a result of panic buying.

BY MTHANDAZO NYONI

Giving his presentation at the Institute of Chartered Accountants of Zimbabwe winter school held in Victoria Falls recently, CZR president Denford Mutashu said it was important to pay particular attention to the basic principles of economics.

“What is important to note is that the principles never change; only people may wittingly or unwittingly try to bend them, much to their dismal failure. For Zimbabwe to effectively tame the price hikes being experienced, we have to therefore, go back to the basics,” he said.

“The price hikes being experienced right now are both a pricing madness and to a greater extent a response to the reality on the ground. For the economy to return to a sustainable equilibrium, it is important to first deeply reflect on what has gone wrong,” he said.

Mutashu also said the price hikes being experienced in the country were not unique.

“They can be easily diagnosed by the basic principles of economics. The price increases are either demand pull or cost push. They are being caused by a rise in aggregate demand as well as increases in the price of inputs such as raw materials,” he said.

“In either of these cases, there is a cost that arises and has to be apportioned throughout the value chain. Let us now get into the particular details of the phenomenon.”
Mutashu said price increases were not in the interest of sustainable consumption as they tend to increase the cost of living of the generality of the populace.
“But being price takers and facing the obligation of providing adequate goods and services around the clock, retailers are sometimes forced to respond to the market reality. No one wants to walk into an empty shop,” he said.

“Most retailers sell fast-moving consumer goods, which means that they have to acquire foreign currency fast to restock and meet demand. Anything short of that will create shortages which will create further problems.”

He said government should expedite the launch of the industrial, trade and the local content policies to chart the new industrial path.

“Government must also reduce its spending appetite as it has often financed its runaway expenditure through the creation of additional real time gross settlements which also created excessive demand in the economy, as well as price increases,” he said.


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