Retailers Reduce Prices As Liquidity Crunch Bites
Shops have reportedly started to reduce prices following a similar move by manufacturers who are reducing prices for goods supplied using forward pricing models.
The development follows plummeting consumer demand due to the prevailing liquidity crunch.
According to a Business Weekly report, some suppliers are now issuing credit notes to retailers so that they can reduce their prices.
Shopowners are being given a choice either to be refunded or to get products worth the value of the note. An executive with a leading retail chain is quoted as saying:
Retailers are now holding too much stock because no one is buying; it’s a combination of high prices because the suppliers had used forward costing models; and the prevailing liquidity crunch.
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Retailers Association of Zimbabwe Denford Mutashu told Business Weekly on Wednesday that customer traffic into formal shops had declined by an average of 35 per cent. Said Mutashu:
It’s critical for authorities to increase the injection of some liquidity into the market as the economy continues to contract.
The economic growth projections may be somewhat a mirage.
The velocity of money is key to any economy thriving to maintain its growth trajectory. There is a need to essentially balance the tight monetary trajectory with a necessity for effective demand.
In July the Reserve Bank of Zimbabwe (RBZ) introduced gold coins as an alternative to store value instead of US dollars.
Harare-based economist, Victor Bhoroma, said though prices were falling, demand for fast-moving consumer goods has also fallen as well. He said:
It is true that prices are going down, consumer demand for fast-moving consumer goods has slumped and the free-market exchange rate has retreated.
This is largely due to the non-payment of government contractors and suppliers and the mopping of excess liquidity by the central bank through daily and weekly Negotiable Certificates of Deposits (NCDs) to commercial banks locally.
The interventions will not replace the need for a market-driven foreign exchange market and the need for the central bank to end all quasi-fiscal operations that lead to untenable money supply growth in the economy.
Hence, it is necessary to give it time and assess Government’s sincerity to critical reforms that bring long-term economic stability.