Exchange Rate is Prime Driver of Price Increases
There is positive relationship between the depreciating exchange rate and increases in ZWL-denominated cost drivers.
The Competition and Tariff Commission and National Competitiveness Commission conducted a joint study on the pricing disparities of basic commodities, cost drivers of recent price hikes, and impact of import license and duty removal on price stabilization.
The Ministry of Finance and Economic Development recently implemented measures to stabilize Zimbabwe’s exchange rate and macro economy, including lifting restrictions on importing basic goods.
The Ministry also listed 11 basic commodities benefiting from the policy: maize meal, rice, milk, flour, salt, cooking oil, sugar, petroleum jelly, toothpaste, bathing soap, and washing soap.
The study, conducted by various government agencies, assessed pricing disparities, investigated cost drivers of recent price hikes, monitored the movement of basic commodities into the informal sector, and tracked the impact of import license and duty removal on price stabilization.
Summary of Findings:
Price increases of basic commodities in Zimbabwe have been witnessed in local currency (ZWL) terms, while remaining stable in the US$ informal market, indicating that the exchange rate is the primary driver of price increases.
US dollar-denominated cost drivers were relatively stable compared to those charged in ZWL, suggesting a positive relationship between the depreciating exchange rate and increases in ZWL-denominated cost drivers.