Zimbabwe’s businesses are increasing the prices of their goods and services in United States dollar terms as they seek to compensate for a policy that compels them to liquidate 20% of their hard currency earnings to the central bank.

A recent survey by Inside Business in the country’s capital Harare, shows that the prices of some goods and services are being adjusted in US dollar terms, despite the general stability of that hard currency.

Businesses in the country are required by law to dual price their goods and services (that is, in Zimbabwe dollars and US dollars).

It has also come to fore that some businesses are not happy with the Reserve Bank of Zimbabwe (RBZ)’s weekly foreign currency auction system, which currently places the official exchange rate at 83.32 to the US dollar, from 83.39 in the previous week. The parallel market rate is ranging between 100 and 110 to the US dollar.

To this extent, some operators are adjusting their US dollar prices to avoid losing out (as they see it) to the official rate.

But the recent spate of US dollar price increases has been attributed to the 20% foreign currency surrender requirement, which was implemented through last month’s Monetary Policy Statement (MPS).

In terms of the RBZ’s new policy, 20% of all new foreign currency taken by Zimbabwean businesses from local customers must be liquidated at the official exchange rate, when deposited in a domestic foreign currency bank account.

In recent weeks local businesses have complained that its taking too long for the central bank to give them their Zimbabwe dollar equivalent for the 20% that would have been liquidated.

This has ‘forced’ a number of these operators to adjust their US dollar prices to make up for the ‘lost’ funds. But this has repercussions as it inflates the prices of goods and services in the country thus further driving inflationary pressures.

Zimbabwe’s annual rate of inflation currently stands at over 800%.

But not all businesses are expected to comply with the 20% foreign currency requirement.

“For the avoidance of doubt, all existing balances in the domestic foreign currency accounts will not be affected by this policy.

“This policy measure shall also not apply to recipients of free funds including individuals, embassies, non-governmental organisations, tobacco and cotton producers and domestic FCAs (foreign currency accounts) for fuel companies,” said RBZ governor Dr John Mangudya while announcing the Monetary Policy Statement last month.