Zimbabwean finance Minister Mthuli Ncube. Picture: FABRICE COFFRIN I/ AFP
Zimbabwean finance Minister Mthuli Ncube. Picture: FABRICE COFFRIN I/ AFP

Harare — On Wednesday, Zimbabwe’s finance minister accused local businesses of profiteering for linking price increases of basic goods to exchange rate movements of a new transitional currency.

Since the RTGS dollar was introduced in February, prices of staples including sugar, cooking oil and rice have risen as much as 60%, squeezing already hard-pressed consumers and fueling resentment against President Emmerson Mnangagwa’s government.

The RTGS launched at 2.5 to the US dollar on February 22 but now trades at about 4.3 on the black market.

Price changes should be determined by inflation trends, finance minister Mthuli Ncube said, adding that month-on-month inflation was slowing. “It is actually bad economics to link price increases to the exchange rate. That’s not how you do it, it is profiteering,” Mthuli told reporters.

The country dumped its hyperinflation-hit local currency in 2009 and replaced it with the US dollar, which has been in short supply since 2016. That has, in turn, driven shortages of fuel, medicines and other goods, hobbling the economy.

In February Zimbabwe scrapped a 1:1 peg between the dollar and the bond notes and electronic dollars it introduced to compensate for the hard currency shortage, merging the surrogate currencies into the RTGS dollar.

On the official market, the RTGS weakened to 3.03 per US dollar on Wednesday, according to central bank data.

However, some retailers in major cities have pegged their prices using the higher black market exchange rate, as well as offering discounts on US dollar purchases.

Ncube, who was announcing a $400m wage deal for public-sector workers, said the the treasury was monitoring price hikes but would not be drawn on whether it would impose controls.

Although trade in the RTGS is restricted, economists expect the currency to come under more pressure when Zimbabwe starts importing grain as a consequence of a devastating drought this year, likely triggering more inflation.

The year-on-year inflation rate climbed to 59.39% in February. Ncube has previously said annual inflation will fall to below 10% by year-end.