The move by government ordering goods and service providers to revert to 25 March 2020 prices is not be sustainable and could see empty shelves reappearing in retail shops, a top economist has cautioned.
Prosper Chitambara a senior researcher with the Labour and Economic Research Institute of Zimbabwe(LEDRIZ) said government could be setting up itself for failure by imposing a moratorium on a highly informal economy.
He said such a measure is only feasible if it is not supported by direct fiscal support to the private sector.
“As long as the mooted moratorium is not supported by direct fiscal support to the private sector, it will not be sustainable.
“Besides, the Zim economy is now highly informalised and enforcing this moratorium on the informal economy will not be easy,” said Chitambara.
Addressing the media today, Vice President Kembo Mohadi said price increases during the lockdown were speculative and unjustified hence the decision to order a price moratorium.
State media quoted Minister of information Monica Mutsvanga revealing that an agreement with the private sector producers and retailers on the price freeze for essential goods was imminent.
Prices of basic goods have shot up largely driven by a huge jump in exchange rates, both interbank and black market, despite Reserve Bank of Zimbabwe putting a fixed exchange rate.
Chitambara said such inflationary reaction was anticipated from a fixed exchange rate.
“A fixed exchange rate provides a fertile breeding ground for rent seeking and arbitrage which have an adverse effect on stability, ” said Chitambara.