New forex rules may trigger shortages

AT the height of Zimbabwe’s economic turbulence in 2008, price hikes were amplified by harsh monetary regulations imposed by government which also resulted in shortages of goods in retail shops throughout the country. The National Incomes and Pricing Commission had unilaterally imposed strict price controls which forced retail shops to channel stock to the black market where they got better returns because authorities could not regulate black market activities.

Goods flooded the black market where prices were always high to keep pace with the free-falling Zimdollar.

Then inflation reached an unprecedented 500 billion percent in 2008.

The market only stabilised during the government of national unity when the economy was liberalised following the removal of price controls and introduction of the multicurrency regime.

This resulted in price stability and goods were back on the shelves within a short space of time.

Instead of learning from its past mistakes, government is at it again, imposing stringent controls on foreign currency and Zimdollar trade.

This week’s gazetting of Statutory Instrument 127 of 2021 Presidential Powers (Temporary Measures) (Financial Laws) showed all and sundry that our government has thrown best economic practices through the window.

The SI, that seeks to criminilise pegging prices above the official Reserve Bank of Zimbabwe exchange rate, is likely to be met with price hikes and massive shortages.

It reads in part: “Upon the expiry of the 90-day period within which any civil penalty order of any category must be paid or complied with, the defaulter shall be guilty of an offence and liable to a fine not exceeding level six or to imprisonment for a period not exceeding one year or to both (in the case of a corporate defaulter, every one of its officers is liable to the penalty of imprisonment, and to the fine if the corporate defaulter fails to pay it).”

Businesses will hike prices to cover up for the higher rate they have been charging on foreign currency exchange.

It is high time monetary authorities learn that imposing harsh regulations will fuel price hikes and result in the emergence of the black market. Simple economics laws of supply and demand should govern the retail sector as imposing stringent regulations is detrimental to the economy.

Inasmuch as they want to maintain the foreign currency exchange rate, monetary authorities should also consider the repercussions of such moves because a combination of delinquency on the part of the retailer and over-regulation by government will be disastrous. Likewise, we remind business that it is good corporate citizenship to price goods and service fairly.

All sides must be fair to consumers, and the economy.