This archive report was first published on 30 September 2021.
On September 29, Zimbabwe's treasury announced plans to adjust tax bands for workers in an effort to boost their purchasing power, which has been eroded by escalating prices.
The escalating prices are largely attributed to the activities of the parallel market, where the foreign exchange rate is significantly higher than the official rate. The parallel market rate is currently around 1 U.S. dollar to 180 Zimbabwe dollars, while the official exchange rate is 1 U.S. dollar to 87 Zimbabwe dollars.
Many traders and retailers are opting for the parallel market exchange rate, leading to increased prices and leaving consumers worse off.
According to local media, the treasury's intervention is expected to bring relief to consumers who have fallen prey to unscrupulous business activities, including those benefiting from the Reserve Bank of Zimbabwe's foreign currency auction.
Since its inception in June 2020, the auction has disbursed nearly 2 billion U.S. dollars to 4,000 businesses.
Finance and Economic Development Minister Mthuli Ncube stated that the government is working closely with the private sector to address the demand and supply dynamics and restore consumer purchasing power.
“First of all, what is driving the increase in prices has been the parallel market activity, which most of the retailers will then link their prices to. Yet we have got an auction system, which is well functioning and able to supply foreign currency quite a lot in the main. Companies have already accessed over 1 billion U.S. dollars for raw materials, equipment and so forth,” Ncube said.
