‘Poor Zimbos bartering food due to eroded purchasing power’

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BY TATIRA ZWINOIRA

Poor households are bartering food as Zimbabwe’s macro-economy remains highly volatile and continues to deteriorate, according to a report by the US Famine Early Warning Systems Network (Fewsnet) shows.

Fewsnet, a United States Agency for International Development that provides information and analysis on food security, says the main driver of economic challenges were foreign currency shortages in its new June 2019 to January 2020 Food Security Outlook report.

“Formally employed workers in both the government and private sectors were previously calling to be paid in United States dollars, which most employers could
not afford. The population engaged in the informal sector continues to grow. These households engage in petty trade and self-employment activities, among other
activities. However, increased competition and low demand for products and services are resulting in below average incomes,” part of the recently-released
Fewsnet report read.

“As cash shortages continue, there is an increase in the use of mobile money transfers for payments. The high and increasing service charges imposed by
retailers, traders, and service providers are further eroding households’ purchasing power. In some cases, poor households are resorting to bartering for
food.”

According to the report, the continued devaluation of the local currency, increasing fuel prices, as well as the deteriorating and volatile macro-economy have
driven increases in food and non-food prices beyond the reach of many.

As a result, the purchasing power of household incomes has greatly reduced as these monies are being adversely eroded. For example, cooking oil and sugar
prices increased by over 100% between May and June. Driving the decline in the local currency is the fact that it is not backed by adequate amounts of forex or
market confidence, thus weakening the local currency.

Currently, there are three pending cases in the High Court of Zimbabwe challenging Statutory Instrument 142 of 2019, which reintroduced the Zimdollar and
banned foreign currencies.

“Some food commodities recorded over 150% price increases during the same period. Some basic foods, including cooking oil, sugar, and bread are not
consistently available in markets across the country. This is partly due to foreign currency shortages for imports,” the report read.

“Maize grain availability is limited in markets across the country due to poor harvests. Also, despite the recent maize harvest, maize grain prices continued
to atypically increase from May to June. In mid-June, the government introduced new maize producer prices, only two months after the previous producer price increase.”

Prior to the government’s announcement to ban foreign currency on June 24, most goods and services were quoted in US dollars, or alternatively in local
currency. However, these were at extremely high prices, and were pegged above the official and parallel market rates.

“These high speculative prices in the local currency are meant to cushion businesses who access foreign currency on both the official and black markets, where
the local currency is rapidly depreciating. Subsequently, prices of most basic foods are well beyond what many poor households can afford, when available,”
Fewsnet said.

The Fewsnet report found that the Zimbabwe macro-economy remains highly volatile and continues to deteriorate. According to the Zimbabwe National Statistics
Agency, the annual inflation rate was 175% as at end of June; the highest in 10 years. However, some independent estimates indicate that the annual
inflation rate is over 300%.

“In mid-June, Zimbabwe’s local currency (RTGS dollar) devalued by 140% against the US$ on the official interbank market, compared to late February, when the
interbank market rate was established at US$1: $2,5. Parallel market exchange rates also spiked by over 150% by mid-June, trading at an average of US$1:$10 to
$11. The RTGS dollar continued to devalue on an almost daily basis through the third week of June.”

The RTGS dollar was replaced by the Zimdollar on June 24.

“In late-June, Zimbabwe’s central bank banned the use of foreign currencies, re-introducing the Zimdollar (comprising of bond notes and RTGS dollars (RTGS $)
as the sole legal tender for transactions in the country. In the days following the announcement, food and non-food prices continued to increase; however,
market impacts are not well understood at this point as the market needs time to adjust and respond to the new supply and demand structure,” of the report
read.