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Price Hikes In Cotton, Wheat And Maize Behind Money Supply Resurgence

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African Economic Development Strategies (AEDS) executive director Dr. Gift Mugano believes, some of the drivers of black-market rate spiral were massive price hikes in commodities like cotton, wheat and maize.Dr. Mugano says this has caused a serious threat on money supply resurgence, prompting Central bank Governor Dr. John Mangudya to institute measures aimed at cleaning out bad money.

Speaking to Parliamentarians during a 2022 pre-budget seminar, Mugano said,

“If these factors are not addressed, the auction system is holding on a thin threat and its collapse is imminent and we will enter into dollarization (100%),” he said.

He added that recent fuel and basic commodities price increases had caused inflationary pressures which scuttled the auction system, the self-fulfilling prophecy such as exchange depreciation caused further depreciation as market watchers throng the black market to preserve their currency and the foreign exchange backlog.

Massive incapacitation of workers since most workers earn salaries below poverty datum line which has now topped $5 770 per person and the consumer basket is $40 000 for a family of six.

“Although the Zimbabwe dollar has remained relevant it is under serious threats from exchange rate spirals in the black market. The worsening poverty levels which are at 49% of population in extreme poverty are a threat to social unrests and low aggregate demand,” said Mugano.

The World Bank estimates that the number of people under the food poverty line, or people living with income under USD $1,90 per day has increased from three million 2011 to 4,7 million (29% of the population) to about six million in 2019 and rose to 7,9 million in 2020.

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