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Economists warn against USD-based prices

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The Economists Roundtable has implored businesses to stop pegging prices of goods and services against the value of the US dollar since the costs they incur are in local currency.

The call follows the introduction of currency reforms contained Statutory Instrument (SI) 142 of 2019. 

Key among the reforms in SI 142 0f 2019 is the scrapping of the multi-currency system and coming in of the Zimbabwe dollar. 

The Economists Roundtable told journalists yesterday that pegging prices against the value, which has been prevalent since 2009 when the country adopted multiple currencies, was no longer necessary.

“Ever since we dollarised, everybody has been benchmarking against the US dollars,” said former University of Zimbabwe economics lecturer Professor Ashok Chakravarti. 

“We are not the United States of America, we are Zimbabwe. We need to start thinking in terms of our local currency, our costs are local costs; we pay our workers in local money, all our costs of production are in local money. 

“We need to start thinking in terms of costing, pricing, payments in local currency . . . we must start moving away from benchmarking against the US dollar to using normal prices as everybody does in Zambia. 

“People don’t think in US dollars in Zambia or in Malawi or in South Africa, they think in local currency and they price everything in local currency. So it’s an issue of the mindset and psychology, it will take some time.” 

Prof Chakravarti also applauded Government for consulting widely in policy formulation. 

He said the previous Government did not consult and whatever it decided was final.

“Now you can see today that that’s not the way economic policy is being made, there are many voices, there is the roundtable, there is the CZI (Confederation of Zimbabwe Industries), there is the Chamber of Mines . . . 

“The previous Government believed the State was the mother, father and brother and sister directing everything,” he said. 

The economists expect the coming in of the local currency to spur demand and continue to force downwards the rate of the US dollar against the Zimbabwe dollar.

They added that the hiking of the interest rate to 50 percent will also manage excessive borrowing for speculative reasons. —Chronicle


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