‘Zim has no price distortions’

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Government has denied there is a three-tier pricing system with Industry and Commerce deputy minister RajeshKumar (Raj) Modi claiming the 2019 Monetary Policy Statement (MPS) by Reserve Bank of Zimbabwe governor John Mangudya completely solved the issue.

Modi was speaking in Parliament during a question-and-answer session last week.

Bulawayo East MP Ilos Nyoni (MDC Alliance) had asked Modi to explain the measures government was taking to resolve the three-tier pricing system currently prevailing in the market.

“Let me inform the House that the question on the three-tier pricing of commodities has been overtaken by events following the February 20, 2019 monetary statement by the Governor of the Reserve Bank of Zimbabwe, during which he introduced an exchange rate between the RTGS$ and the US$,” Modi said.

But Nyoni said the three-tier pricing system was still in effect, with different prices when one was buying using Ecocash, ZWL$ and US$, with a lot of distortions prevailing in the interbank market as well as overpricing.

“Practically, what is prevailing in the market is different from what the minister is saying,” the legislator argue.

Prices of goods and commodities are being charged in either the United States dollar, ZWL$, which is virtual money, and in bond notes.

Modi, however, maintained that the three-tier pricing system was solved when the MPS was announced, adding that prices were now determined by the prevailing exchange rate.

Mbizo MP Settlement Chikwinya (MDC Alliance) insisted on that there is a price distortion arising from the fact that the exchange rate, as obtained at the bank, is not the same as obtained even on the Old Mutual implied rate.

“This is what is making the three-tier pricing system continue. The question is: what policy measures are you putting in place to ensure that we eradicate the three-tier pricing system taking into cognisance the reality on the ground?” he said.

More: newsday

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We are a team of independent analysts whose primary focus is research into the Zimbabwean parallel markets as well as the stock market. We strive to bring you the most accurate rates in the market and our independence means we have no bias on these rates. You need to make your business decisions and we strive to be your best source of information.

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The Lingo

OMIR

The ‘Old Mutual Implied Rate’ is a comparison between the Old Mutual share price on the London stock exchange / the Johannesburg stock exchange and the Zimbabwe stock exchange. Effectively RTGS is valued at 1:1 with the USD, but this difference in share price gives us the implied countries exchange rate.

RTGS

Real-time gross settlement systems (RTGS) is a funds transfer system where money transfer takes place from one bank to another on a “real time” basis and “gross” basis. Settlement in the “real time” means that the transaction happens almost immediately.

BOND

The Zimbabwe Bond Note is a surrogate currency issued by the Reserve Bank of Zimbabwe. This was originally issued against a loan facility from the African Export-Import Bank. The Bond Note is officially 1:1 however the market seems to have significantly discounted the value of the Bond Note.

ZAR

The symbol ZAR is the currency abbreviation for the South African rand.