Zimbabwe is likely to experience food shortages before year end on the back of hard currency shortages, an international think-tank has cautioned.
In its Country Risk Report for the fourth quarter, Fitch Group member, BMI said the central bank’s decision to more than double the size of its bond note holdings would also see inflation move more firmly into positive territory — leading to price hikes — over the coming months as the money supply increases further.
“… The effect will be compounded by the likelihood of shortages of imported goods as the supply of hard currency with which to access foreign goods continues to fall,” BMI said.
The Fitch Group member, however, pointed out that stronger harvests and improving liquidity in the economy would help lift Zimbabwe out of recession in 2017, with real GDP growth accelerating over the coming quarters.
“However, we add that risks are heavily skewed to the downside in this outlook, with uncertain monetary policy and political instability both threatening to derail the country’s fragile recovery,” the think-tank said.
Noting that rising gold prices and tobacco production would see Zimbabwe’s export revenues post positive growth for the first time in five years over our short-term outlook to 2019, BMI said the country’s external position remains highly constrained by the on-going shortage of hard currency.
Local retailers have already warned of impending food shortages, with Confederation of Zimbabwe Retailers (CZR) president Denford Mutashu pointing out the retail sector is reeling from foreign payment delays which had resulted in them failing to stock imported product lines, which they say account for a sectorial average of 40 percent.
“Empty shelves are not far; very soon they will become a thing given that local manufacturers are also failing to secure forex allocations to import raw materials crucial in the manufacturing process.
“Furthermore, as retailers, we have lines that need to be imported but have not been getting allocations from the banks to procure them. In this situation, most of us have been forced to forex on the black market in order to import these products but there is a problem with that.
“The problem is the forex has been coming at a premium of between 10 and 35 percent which is frankly unsustainable. You will also notice that in light of this some of these costs are being passed on to the consumer.
“Overall, there is a real chance that shortages of certain products will start very soon,” Mutashu said at a recent meeting of the CZR and Reserve Bank of Zimbabwe (RBZ) governor John Mangudya.
At the moment, local companies are failing to secure key raw materials or re-stock from foreign countries as the country’s banks have low nostro account balances leading to failure in payment of offshore obligations.
In light of this, retailers have been forced to buy cash from the parallel market at high premiums for import usage. In the parallel market, bond notes are trading at a discount to the US dollar while electronic balances reportedly exchange at a discount as well. Daily News