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‘Auction exchange rate fuelling price distortions’

The government’s foreign currency auction-determined exchange rate of the United States dollar against the local currency is to blame for the price distortions in the market and has to be done away with, former finance minister Tendai Biti told Parliament Tuesday.

The Zimbabwe dollar as at Tuesday is trading at ZWL$83.88 against the greenbacks according to the results of the weekly foreign currency auction system introduced in June last year by the Reserve Bank of Zimbabwe.

However, in the parallel US$1 is equivalent to something from ZWL$100 or more, the exchange rate now adopted by some supermarkets, creating pricing distortions.

“Mr Speaker Sir, I rise on a matter of urgent national importance, one which the government, the executive itself has already noted which relates to the rise of prices, the rise of the consumer price index, the rise of inflation in our country,” said Biti in the August House.

“Despite the introduction of a mono-currency through SI 33 of 2019 and SI 142 of 2019, it is clear that the economy has largely become an informal USD economy. It is also clear that citizens are being subjected to a regime of multiple prices. So, you find goods indexed in ZWD but also indexed in USD.”

He further said: “The trick and the dishonesty particularly with regards to retail outlets, they will price their goods at prices that are indexed at the unofficial parallel rate also known as the black market, whether 1:25 or 1:30 but when you buy in the large supermarkets when you are using the USD, they discount it at the official auction rate which is 32% or 30% lower than the parallel market rate. So they are having a double dip Hon. Speaker Sir.”

He said it was high time the responsible authorities acted.

“I appeal to the authorities, in particular, the Ministry of Finance and Economic Development to do either of the two following things; to acknowledge the informal re-dollarisation of the economy that has taken place and secondly, just liberalise the exchange rate so that we do not have the fixed auction-rate which has been fixed at US$1 is to ZWL$82 for the past six months. Our people are suffering as a result of high inflation in the country.”

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