Prices of most basic commodities, particularly food items, have surged by more than 30% since last year as the Zimbabwe dollar continues to lose value against the greenback.The new 15% value-added tax (VAT) that kicked in on January 1 this year after its introduction in the 2024 National Budget by Finance, Economic Development, and Investment
Promotion Minister Mthuli Ncube has triggered a rise in prices of basic commodities including bread, milk, sugar, soap, and cooking oil. Bread price, the foremost indicator of a price stampede, shot past US$1 to US$1,30.
The last time bread cost more than US$1 was in 2018 when it retailed at US$1,10.The price hikes come despite the government having reviewed its tax regime early this month to forestall a price stampede. A snap survey carried out by NewsDay in Harare and Goromonzi over the weekend showed that all prices of basic commodities had increased in both Zimdollar and US dollar terms.
For instance, a loaf of bread, which used to be ZWL$7 818, has risen to ZWL$11 000, a 2kg bag of flour, previously priced at ZWL$22 499 has increased to $26 600, while a 2kg packet of rice has increased from ZWL$21 745 to ZWL$27 599.
Bread is retailing at between US$1,10 and US$1,30 from US$1; 2kg flour is now US$2,30 from US$2 and a 2kg packet of rice is being sold at US$2,60 from US$2,20.Sugar sells at US$3 from about US$2,50 while cooking oil retails at over US$3,50 depending on the brand.
The survey also indicated that most of the basic commodities were available in most shops, including rural stores, although the prices varied depending on the type of businesses and area.
In an interview yesterday, economist Prosper Chitambara said the basic goods price increase was attributed to increased taxes and the worsening depreciation of the Zimdollar, which is now trading at ZWL$14 500 to the greenback on the black market and ZWL$9 000 on the official market.
“The devaluation of the currency is a result of the majority of agencies losing faith in the local units. People will be converting local currency into hard currency, so demand for the dollar will undoubtedly be high regardless of the local currency or amount of local currency injected into the economy,” Chidambaram said.
National Consumer Rights Association spokesperson Effie Ncube said the Zimbabwean economy was experiencing depreciation due to a loss of confidence in the local currency. He said Zimbabwe’s current price hikes were triggered by inflationary taxes, including toll fees, fuel increases, and VAT.
“Taxing our way out of the present problems is not an option. In actuality, the new and increased taxes were the cause of the current price increases. These have a strong inflationary effect,” he said.
“Thus, as it stands, the budget was the catalyst for the soaring costs. The budget, like fuel increases, created panic and grave concern rather than providing comfort to the market.”Some of the budgetary measures that are causing prices to go up include toll fee increases, fuel increases arising from Statutory Reserve Levies, the removal of some products from zero rating to standard and value-added tax.”
Ncube said economic policies should focus on productivity to address foreign currency shortages, adding that a lack of market confidence in the Zimdollar and a shortage of foreign currency contribute to instability and price volatility.
“We need to prioritize productivity in our economic policies to address the persistent shortage of foreign currency. The policies that have been implemented over the years do not enjoy the confidence of the market, and our economy lacks stability,” he said.
“Much of the instability and price volatility is caused by a shortage of foreign currency and lack of market confidence in the Zim dollar.”The government was forced to review some of the measures introduced through the 2024 National Budget, with basic food items such as bread, milk, cooking oil, and maize meal, exempted from VAT.
Other basic commodities such as meat, rice, bath and laundry soap, washing powder, toothpaste, and petroleum jelly have been moved to standard rating, which means price increases should be minimal.
The Finance Ministry announced the changes following concerns that the heavy taxes could have unintended consequences. Treasury constituted a technical committee to receive input from representative members through the Confederation of Zimbabwe Industries.
The committee undertook an impact analysis on the implementation of some of the measures introduced through the 2024 budget, in particular with regards to tax compliance en route to the market, mitigation of consequences of sugar on health through a special surtax, and a few tariff lines omitted on exemption from VAT, to cover the whole value chain.
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