Widening gap between parallel exchange rate and bank rate to US dollar has created serious challenges for Zimbabweans.

Zimbabweans will hold muted celebrations for Christmas as economic challenges coupled with the effects of the pandemic continue to mount.

For Richard Phiri, a school teacher in Mhondoro, 95 kilometers (59 miles) southwest of the capital Harare, this year’s Christmas will be just like any other day.

“As a teacher, I am always in arrears, I got my bonus in US dollars in November but that money was directed toward pending school fees.

"If the economy was right, I would have slaughtered a goat for a family feast and bought my children new clothes and gifts, unfortunately, I can’t and I will spend time in the fields,” said the 45-year-old father of three.

“I sometimes get help from my sisters staying in South Africa, when they visit end of each year during the festive season, we get to share the responsibilities, this year they won’t be traveling as they will be forced to quarantine for 14 days,” Richard added.

However, Richard received some money from his sisters for him and his aged parents who live in the nearby Marenga village.

“I received $100 to cushion myself for Christmas from my siblings living in South Africa, but again the exchange rate rendered that money useless. I had to share some of my groceries with my parents who live in a village close by,” he added.

The government paid a Christmas bonus to employees in US dollars this year to cushion them from the effects of inflation.

Economists said the move by the government has triggered price hikes.

“This was commendable on the part of the government, but most government workers decided to pay school fees for next year, rentals and food, leaving nothing for Christmas,” economist Luckson Zembe said.

"Business has not been doing good throughout the year owing to various challenges, including COVID-19. The assumption by retailers is that everyone received a bonus, hence they have increased prices to make up for the losses during the year,” he added.

Glum consumer sentiment

Anadolu Agency spoke to several people on the streets of Harare and the majority revealed their Christmas celebrations were going to be bleak.

“I am a mechanic, my customers are challenged economically and cannot pay me as much as I would prefer. To make money I would have to fix many cars.

"As such, I am unable to travel to my rural home and join my parents for Christmas, I will just have to send them some money which I already know is worthless owing to inflation,” a mechanic, Allan Banda said.

Olivia Mpeta, a 36-year-old mother of two, said: “Children love toys, new clothes, shoes and maybe going out on Christmas. I am unable to do that this year because I have to save money for school fees next year.”

“I am a second-hand clothes vendor in Harare, I could see people flocking in with their children to buy the cheap clothes we sell, yes sales were better than other normal days not comparable to other Christmas periods. This year people seem to be focusing on books and food,” James Munemo, a vendor said.

Economist Zembe said a delay in rains has exacerbated the problems.

“The rain season has not been really good, so far the first part of the season that ends December has produced little rain.

"A number of people are beginning to start working on the fields now, yet normally by this time, families would be helping themselves to green mealies, and cushion themselves on Christmas,” Zembe said.

Exchange rates

According to the Consumer Council of Zimbabwe (CCZ), the low-income monthly basket for a family of six increased to 68,000 Zimbabwean dollars by end-November from 41,000 Zimbabwean dollars in June 2021.

Meanwhile, in December, the Reserve Bank of Zimbabwe pegged 109 Zimbabwean dollars to the US dollar.

At this rate, 68,000 Zimbabwean dollars are worth $624, but only $296 at the parallel exchange rate of $230.

The term refers to the rate in the black market.

“We expect the family basket for December to go up owing to price hikes of basic commodities such as cooking oil, sugar, and fuel,” Consumer Council Executive Director Rosemary Mpofu told Anadolu Agency.
Economist Zembe concurred with the CCZ survey.

While economists have predicted the inflation rate to end around 300% this year, the government says it was ending at 54%, down from 800% the previous year.

The government is however worried about the widening gap between the parallel exchange rate and the bank rate to the US dollar which has created serious challenges for many Zimbabweans.