By Lloyd Takawira
The recently gazetted SI 127 of 2021 which has triggered a sudden hike in USD prices of basic commodities could worsen the already ailing economy, analysts have warned.
To curb leakages in the financial service sector, government gazetted statutory instrument 127 of 2021. However the move has stirred controversy with prices of basic commodities shooting up and retailers refusing to accept payments in USD currency.
The recently gazetted Statutory Instrument (SI) 127 of 2021 has been met with fierce criticism from various quarters.
Responding to the latest SI 127 of 2021, economist Tinashe Nyenyedzi writing on his blog said the latest SI 127 “Rule by terror” will further plunge the country into the doldrums.
“So swimmingly was the Auction system that “stability” became a catch phrase in describing the state of the economy. Business leaders & economic analysts told us the second half was going to be amazing. So one must inquire. Why SI 127? That is the context in which we find SI 127, it’s a frustrated government that wants to achieve its goals by terror. It is now criminal to sell a good above the official exchange rate.
This will remove USD pricing that implies a rate.By quoting prices exclusively in ZWL a business can increase its price. OR Increase its USD pricing. In which case the customer will opt to pay in ZWL.
So before the next explicit ZWL price controls, formal businesses will only quote ZWL. Informal will ignore the SI.
The terror campaign by GOZ is driven by the rapid dollarisation of the economy & ZWL losing value. Never mind the RBZ lax monetary policy is the reason for the increase in money supply, ” he wrote.
Former Finance Minister Tendai Biti blasted the latest SI arguing that it has created room for hyperinflation.
“The RBZ is a rogue bank at center of arbitrage& rent seeking extraction .However in SI 127 of 2021 they have chewed more than they can swallow.The genie of hyperinflation has been let out of bottle. But more importantly #TRUST has completely crashed. This is worst gvt in history.”
Economist, James Choruma stated that endless statutory instruments will further put a red tag on Zimbabwe investment prospect as investors have become sceptical of government’s inconsistent policies.
“When one wants to Invest they require & seek for a STABLE and Predictable Regulatory environment on this unfortunately GOZ have TOTALLY failed thanks to SI 27 of 2021. The stock market & black market rise because the stock of money has been increasing,” wrote Choruma .
United Kingdom based lawyer, Alex Magaisa claimed the sudden hike in USD prices of goods and services is a response to the ‘command economics’ being instituted by President Mnangagwa’s administration .
Magaisa said the law will lead to the expansion of the foreign currency black market.
“SI 127 of 2021: Rule by the hammer – it doesn’t work. One general rule that I have learnt purely by experience as a Zimbabwean is that there is a positive correlation between more decrees to control the foreign currency (forex) market and the expansion of the parallel (black) market in forex, goods and services._
In other words, the more the government tries to command & control the formal market by decree, the more the informal/parallel market grows. This is partly because economic actors seek to avoid the debilitating & punitive impact of the formal market decrees. And when they do the parallel market expands.
“Government is now trying to direct the market using SI 127 but as always happens, the market will devise ways to dodge these rules. The principal dodge agents are the PEPs. One prediction is that because SI 127 is a device for price controls, we will end up with a shortage of certain goods in formal shops, but an abundance of them on the street but sold at parallel market rates. Just go back to 2007/8 and remember what happened.
“Those who can afford it will hoard goods at controlled rates and sell them on at parallel market rates on the street. The formal shops might even direct goods to the parallel market. “The street” is both literal & metaphorical. Since the controlled rate is rigged, government has effectively imposed price controls. It never ends well. It always ends in tears.”
According to social and economic justice lobby group, Zimbabwe Coalition on Debt and Development (ZIMCODD) the new statutory instrument will further burden the poor.
“As ZIMCODD we notes with concern that SI 127of2021 glimmers an elite-governance phenomenon which is exclusionary in nature &perpetuates inequalities as it does not take cognizant realities of the economy as experienced by majority of poor people.”
A survey by Bustop TV News revealed that prices of goods have spiked in both US$ and ZWL$ terms since the promulgation of the latest SI.
This means the unabated rise in prices of basic commodities would further erode the consumers’ purchasing power.
However the government has said the measures are not intended to harm the economy .
“The S.I is not designed to harm business but to provide a level playing field for business and to protect consumers. The use of parallel exchange rates of above 100, for example, on funds obtained from the auction at ZW$85 to US$1 is not good for the economy and consumers. It is these anomalies or arbitrage opportunities that the S.I is designed to deal with,” reads a statement from the Reserve Bank of Zimbabwe .
