Prevailing price stability commendable — economist

THE prevailing exchange rate and price stability in the market shows that policy measures being
implemented by Government are effective and these must be maintained and reinforced to
promote business growth, economic expert, Mr Persistence Gwanyanya, has said.

Tightening of money supply, clampdown on inflated public supply, contract payments and
suppression of illegal foreign currency dealings, are part of the corrective package interventions
aimed at restoring market discipline.

Speaking at a recent Association of Health Funders of Zimbabwe (AHFoZ) Annual Conference in
Victoria Falls, Mr Persistence Gwanyanya, commended Government for coming up with
comprehensive measures such as the Statutory Instrument 118/2022, which recognises the
interbank rate as the only official exchange rate.

He was presenting on the economic outlook and impact on the healthcare sector.
“What we have seen is an intervention by Treasury on the extortionist pricing and oversupply of
money, firstly through revision of procurement processes and legal framework,” he said.

“S.I. 118/2022 came out of realisation that exchange rates were being used to the detriment of
monetary expansion and stability.

“That is working quite well and we have seen freezing of payments to contractors by Government.
The monetary authorities have responded and supported measures from Treasury by hiking
interest rates to deal with excessive monetary expansion. So, the interest rate of 200 percent was
necessary because it’s in line with inflation,” said Mr Gwanyanya.

He said because of the structural transformation of the country’s economy, which is skewed
towards informality, the interest rate increase was expected to affect those behind the interests.

Mr Gwanyanya said the market was witnessing massive repayment of loans and only a few are able
to go and borrow. He said as long as these measures are implemented with the right pricing
models, there is not going to be instability in the economy saying the important thing is pricing.

“Monetary expansion, which is guided by exchange parameters will not cause instability or price
escalation. What is now important is to deal with sustainability of the measures and as long as
Government provides services at the right price, the measures will be sustainable and will liquefy
the market in a non-inflationary manner,” said Mr Gwanyanya.

Of late there has been reduction in fuel prices and stagnation in most cases on basic commodity
prices as measures being implemented by the Second Republic continue to bear fruits.

Mr Gwanyanya said businesses had also started requesting their creditors to reduce prices on
current and future invoices.

He said the introduction of gold coins was also necessary given the low level of confidence in the
economy, adding that the economy would likely have an oversupply of United States dollar
currency as businesses begin to sell or swop their foreign currency to unwind the Zimbabwe dollar.

Mr Gwanyanya said under such a climate, the country will likely see authorities directing that for
one to get RTGS currency, they have to liquidate their USD.

RTGS and USD money
“This is increasingly happening in the financial services sector and what that means is that there
will be oversupply of USD as we try to unwind the tight monitory,” he said.

“We are beginning to see a reduction in prices because if that doesn’t happen, demand will penalise
the players. This is how far we are seeing these measures being sustainable.”

Mr Gwanyanya said there was a need for Government to always balance growth and stability. — The Chronicle