Top retailers in Zimbabwe are warning that enforced use of an official exchange rate, considered overvalued, could result in store closures. The Zimbabwe Gold (ZiG) currency has lost significant value on the black market, impacting retailers who must comply with official pricing policies while facing higher supplier costs. They call for adjustments reflecting real-time exchange rate fluctuations to remain competitive.
Harare, Zimbabwe – Leading retailers in Zimbabwe have expressed significant concern regarding their future operations due to government mandates enforcing an official exchange rate that they believe is excessively inflated and detrimental to their business viability. Approximately five months into the introduction of Zimbabwe’s gold-backed currency, known as the Zimbabwe Gold (ZiG), the currency has depreciated drastically, losing nearly 80% of its value on the black market, with rates fluctuating between 20 to 26 ZiG for every US dollar. Current regulations compel formal retailers to establish their prices based on an official exchange rate of 14.8 ZiG per dollar, with noncompliance attracting potential penalties. However, major retailers such as OK Zimbabwe, Spar, and TM Supermarkets (a subsidiary of South Africa’s Pick N Pay) assert that this official rate results in inflated prices for their goods compared to those available in informal markets, subsequently deterring customers. The Retailers Association of Zimbabwe (RAZ) has articulated a dire warning, highlighting that the current conditions are “untenable” and could result in business closures if the government does not implement policy changes designed to support the formal retail sector. They noted the disparity between the pricing they are mandated to adopt and the actual rates they must pay to suppliers, which are aligned with black market figures, thus necessitating higher retail prices. RAZ advocates for a pricing strategy that reflects real-time fluctuations in exchange rates to maintain competitiveness and manage operational costs. The Ministry of Finance had not responded to inquiries at the time of this report. Economists are observing that the fluctuating value of the ZiG, which marks Zimbabwe’s sixth attempt at establishing a stable currency within the last fifteen years, suggests a lack of public confidence in this new monetary system.
Zimbabwe has a tumultuous financial history marked by hyperinflation and currency instability. The latest attempt to stabilize the economy involves the introduction of a gold-backed currency, ZiG. However, the rapid depreciation of this currency, particularly on the black market, has led to challenges for retailers operating under strict governmental pricing guidelines. Regulatory frameworks compel retailers to adhere to official rates that lag behind actual market conditions, creating a pressing need for policy interventions to maintain business viability and consumer confidence in the new currency.
In conclusion, Zimbabwean retailers face critical challenges stemming from an overvalued official exchange rate that threatens their competitiveness and sustainability. The Retailers Association of Zimbabwe’s warnings underscore the necessity for government intervention to adjust pricing regulations, thereby enabling formal retailers to align their prices with the realities of the black market. Without such policy changes, the ability of these retailers to operate effectively may be severely compromised, potentially leading to widespread closures and economic repercussions.
Original Source: www.investing.com
