HARARE (Multibagger): Zimbabwean retailers face potential store closures due to an overvalued official exchange rate, impacting their competitiveness.
Five months after its launch, Zimbabwe's new gold-backed currency ZiG has lost almost 80% of its value on the black market, trading between 20 and 26 ZiG to $1.
Formal retailers are required to set prices based on the official exchange rate of 14.8 ZiG to $1, or face fines. This overvalued rate is driving customers away to informal shops.
Retailers like OK Zimbabwe, Spar, and TM Supermarkets are urging authorities to intervene with policy measures to protect the formal retail sector. Suppliers charging black market rates are forcing retailers to increase prices.
Implementing a pricing model that reflects real-time market exchange rate fluctuations can help retailers remain competitive while managing costs, according to the Retailers Association of Zimbabwe (RAZ).
The ZiG is Zimbabwe's sixth attempt at a stable currency in 15 years, with its devaluation indicating a lack of public confidence. The treasury could not be reached for comment.
**Analysis:**
The article highlights the challenges faced by Zimbabwean retailers due to an overvalued official exchange rate, leading to potential store closures. The new gold-backed currency ZiG has depreciated significantly on the black market, impacting the competitiveness of formal retailers who are required to set prices based on an overvalued rate. This situation has driven customers towards informal shops, posing a threat to the formal retail sector. Interventions from authorities and implementing a pricing model based on real-time market exchange rate fluctuations are suggested as solutions to help retailers remain competitive and manage costs. The devaluation of ZiG reflects a lack of public confidence in the new currency and raises concerns about the country's economic stability.