USD Rate Hits 15 As Prices Escalate, Forcing Inflation Up

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The Zimbabwe Dollar continued on a sliding scale as the exchange rate hit ZWL$15 yesterday raising fears of spikes in prices of basic commodities. The rate had been stable around ZWL$10 for US$1 but the beginning of September has seen the local currency lose 50% of its value in just in less than 2 weeks.

On Sunday 10th of September 2019 ZERA increased the price of diesel by 17c from ZWL$10.25 per litre to ZWL$10.42 per litre directly affecting the running costs of most companies who are now reliant on alternative source of power such as generators to keep their businesses in operation due to the current power crisis.

Speaking to companies that have offices and operations in residential areas, they are struggling to keep up with costs of doing business. ‘We never had any power relief, it is between 16 hours to 20 hours without ZESA and to ensure that we remain productive we have 2 generators but fuel costs keep going up.’

Albeit this rate increase will have a negative effect on most companies’ profitability and raise concern on maintaining current prices of goods and services. Retail prices continue to shoot, albeit Telecomms and even fuel is likely to go up again in the next 7 days. Ideally fuel should be USD1,36 which would be equivalent to ZWL$20.4, looking back at voice calls of USD17c, ideally the calls should now be at ZWL$2.55 or so. In pharmaceutical industry, prices are pegged in USD and then on request to pay they are converted to ZWL$ using bank rate of the day – which is not within most people’s reach.

A survey around town in the tuckshops around the city where the USD is mainly changing hands showed that small shop owners were anticipating a hike in prices of basic commodities in line with the new rates. ‘We expect the price of fuel to go up anytime because if you look at the current price of $9.96 for petrol, it means Zimbabwe’s fuel is now the cheapest in the region selling at US$0.66 per litre” said a young shop owner who identified himself as Jivaz. Previously before the country abandoned the USD, petrol was selling at $1.36 per litre.

The current price is less than half that price. See how the current price now compares with the region

Source: GlobalPetrolPrices.com

The spike in fuel will have a multiplier effect on the pricing of goods and services in the economy. We are likely to see cooking oil, bread, mealie meal, rice, sugar, beans and other goods going beyond the reach of the ordinary Zimbabwean.

Maize meal is likely to go up after maize grain was increased from ZWL$726 to ZWL$1,300 per metric tonne, while wheat has gone up from ZWL$1,600 per metric tonne to ZWL$2,000. This is likely to impact price of maize meal.

Currently 10kgs of maize meal costs ZWL$34. Despite wheat subsidies by government which cushion bakers, the price of bread was reviewed from ZWL$7 to ZWL$10 per loaf in light of the currency fluctuation and recent fuel price adjustment.

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