Retail Outlets Ration Staples as Zimdollar Weakens

The Food Security Branch of the United States Agency for International Development (USAid) says some wholesale and retail outlets are rationing scarce food items, as the Zimbabwean dollar continues to depreciate.

The Zimdollar hit a new low of $500 against the US dollar in the parallel market, prompting commodity shortages as businesses hoard food to sell in the informal market.

They do this in the hope of benefiting from a parallel exchange rate above the official exchange rate of $308.52.

Poor rainfall for the 2021/22 agricultural season has seen farmers produce less grain and, given low government prices, they would hold onto their produce anticipating selling it in the informal market.

“In addition to inflationary pressures, shortages of some food staples, including cooking oil, corn flour and sugar, have been reported in the market, with some wholesale and retail outlets rationing items sold per customer or selling exclusively in US dollars,” USAID said. The food security arm, the Famine Early Warning Systems Network (FEWS NET), reported yesterday in its May News Outlook.

“Some of these products are increasingly being sold in the informal sector at significantly higher prices than normal. The government has responded to the shortages by lifting import bans and suspending duties on some basic food items and imported non-food items for six months starting May 17.”

According to FEWS NET, in late April the government announced the continuation of the policy that maize, wheat and soybeans would be controlled commodities for sale only to the Grain Marketing Board or contractors.

“Furthermore, the government has acceded to farmers’ demands for payment in US dollars by announcing that 30% of payment for maize and small grains delivered to GMB will be in US dollars, with the remainder to be paid in Zimdollar,” reported FEWS NET.

However, given the current situation, government grain stocks would decline rapidly, leading the authorities to consider raising producer prices further to induce farmers to sell.

What exacerbated these shortages was the ban on lending facilities early last month, which was only lifted nearly two weeks later.

Indeed, the ban on bank lending exposed the fact that many farmers and businesses depended on overdraft and loan facilities to raise capital for their operations due to inflation.

“In the face of continued devaluation, there is increasing pressure to dollarize the Zimbabwean economy. However, the government has reiterated that it will maintain the dual currency and has announced additional measures to promote the attraction and use of the Zimdollar and to control depreciation and inflation,” said FEWS NET.

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