Zimbabwe’s central bank, the Reserve Bank of Zimbabwe, says anticipation of higher inflation by business is causing an exacerbation of inflationary pressures as these and other economic agents are overpricing their goods and services.

The RBZ’s governor is on record also blaming the rampant parallel foreign exchange market to speculative tendencies by several economic agents.

Forward pricing is typically used in international commodities trading.

The ‘forward price’ is the predetermined delivery price for an underlying commodity, currency, or financial asset as decided by the buyer and the seller of a forward contract, to be paid at a predetermined date in the future.

The RBZ says this form of pricing is worsening the economic climate in the country.

“Price determination in the economy by businesses is being established on the basis of expectations about the depreciation of the exchange rate and prices that will exist in the future,” said the RBZ on Monday.

“This forward pricing system or practice of front-loading anticipated exchange rates in the current prices based on fear factor, is detrimental to the economy, as it leads to self-fulfilling depreciation in the exchange rate, with negative knock-on effects on prices.”

Meanwhile, the apex bank has reiterated its belief that speculation is the fundamental problem behind the significant deterioration of the Zimbabwe dollar, which was re-introducted last year after around a decade of utilizing a multi-currency system of sorts.

The Zimbabwe dollar is trading at a premium of circa 70 to the US dollar on the parallel market, as opposed to the 25 to the US dollar peg on the official interbank market.

The monetary authorities have however hinted that the peg could soon be removed.

“Depreciation in the exchange rate, observed over the past few weeks, was largely a result of behavioral and other non-monetary factors such as negative perceptions, adverse expectations, speculative tendencies of economic agents and tracking of the Old Mutual Implied exchange rate (OMIR), which was quoted at around ZW$140/USD over that period,”,said the local banking sector regulator.

“The depreciation was divorced from economic fundamentals, as it occurred immediately after the opening of the tobacco selling season, which is traditionally associated with stability and appreciation of the local currency.

“In addition, the introduction of the ZW$10 and ZW$20 notes did not represent increase in money supply but a substitution effect – from electronic dollars to physical notes.