Braced for a fresh round of price hikes

Zimbabweans should brace themselves for another round of massive price increases before the end of this year as the twin effects of disruptions to farm activities and the necessity to import huge quantities of the staple maize and wheat started to take their toll on the tottering economy, the weekly ‘Financial Gazette reported on Thursday. The government planned to import 570,000 mts of maize and 100,000 mts of wheat this year at a total cost of over 6.6 billion Zimbabwe dollars, the report said. The government itself, according to an AP report, had begun asking donors for aid to make up for looming food shortages.

The ‘Financial Gazette’ speculated that expenditure on food imports could be much higher than the $6.6 billion because of the foreign currency crisis which had spawned a thriving parallel market for hard cash in the country. Rates on the black market were as high as 190 Zimbabwe dollars for US $1, while dealers on the formal inter-bank market traded at a mid-rate of 55 Zimbabwe dollars to US $1. Analysts told the newspaper the unbudgeted spending on food imports would significantly push up the government’s total expenditure during this calendar and fiscal year and would impact negatively on Zimbabwe’s overall macroeconomic environment. The Treasury had not anticipated food shortfalls.

Kingdom Financial Holdings economist Howard Sithole was quoted saying the government had two options, one of which would be to pass on the extra expenditure on the maize and wheat imports to the consumer. “The other option available to them would be to subsidise the prices of mealie-meal and other foodstuffs like bread and flour,” Sithole said. But he added that subsidies were not a feasible option because of the cash crisis faced by the government and the domino effect a subsidy would have on the rest of the economy. The analysts spoke as the government proposed legislation this week to reintroduce the state-run Grain Marketing Board’s (GMB) monopoly on maize marketing. The proposed legislation would see the GMB being the sole buyer and seller of the staple maize for an unspecified number of months.