THE price of flour is this week likely to go up by over 30% following the skyrocketing foreign currency auction-rate which is now chasing the parallel market, NewZimbabwe.com can exclusively report.
The government, through the central bank, recently introduced a weekly foreign currency auction system in which companies bid for the exchange rate.
The foreign currency auction system, according to the monetary authorities, was expected to tame the black market rate which had gone haywire, threatening to paralyse an already fragile economy.
But contrary to this, the weekly foreign currency auction-rate seems to be chasing the parallel market rate which continues to thrive.
According to a miller who is a member of the Grain Millers Association of Zimbabwe (GMAZ), the rising foreign currency auction-rate has also marginally affected their operations.
The official exchange rate has been moving from $57 per US$1 to $76 per US$1.
“I think you are aware of the fact that since the introduction of the Foreign Exchange Auction Trading system on 17, June 2020, the price of flour related products had been stagnant, and in fact, you saw the reduction in the price of bread which went down by almost 20%.
“Now that the official rate (auction forex exchange rate) has been moving upwards and now by 34% to be precise, we are finding it difficult to operate. In fact, we are now subdued and cannot absorb the production costs,” said the wheat miller who requested anonymity.
He added: “These rising costs of production are likely to see flour prices going up by 26%, and as you know that flour constitutes 50% of the bread-making components and bakeries also have other ingredients which they use which are also affected by the foreign currency auction rate and this would also result in bread price going up by 35%. If bread prices go up history tells us that the prices across the whole economy get triggered.
“We have spoken to the chairman (Tafadzwa Musarara) to approve this because all fundamentals are pointing to an increase. These price adjustments were supposed to have happened last week before 31st of July and it was because of the sensitivity of the price of bread that we thought of sensitising the government first fearing that he (Musarara) could have been seen as giving fodder to the organisers of the failed July 31 demonstrations.”
GMAZ spokesperson, Garikai Chaunza refused to comment.
“We have no comment for now,” Chaunza said curtly before dropping the call.
Taking into consideration these rising production costs bread flour which is costing $42 737,79 per metric tonne will go up to $53 884,42 per metric tonne and this will subsequently trigger the price of bread.