ZIMBABWE— The Ministry of Finance and Economic Development, has directed the cancellation of 17 rogue pharmacy after the Financial Intelligence Unit Investigations (FIU) conducted investigations which found the businesses violating the exchange rate.

The ongoing investigations by the Zimbabwean FIU have revealed that the mentioned pharmacies were using parallel market exchange rates ranging from US$26.40 to US$34.166

The violations have led the businesses to make a considerable profit given that the current exchange rate tithers around US$15.52.

FIU terms this as pegging prices using black market foreign currency rates in violation of the treasury’s exchange control directives.

Notwithstanding observers note the move by the ministry is terrible and that it is likely to cripple the delivery of medication in the country.

The pharmacies whose licenses are drawn from the districts of Kadoma, Chegutu, Kwekwe, Gweru, Rusape, and Mutare.

The Ministry notes that this is a complete violation of government policy and the country’s anti-money laundering regulations.

Moreover, it was also noted that this practice is also rampant and certainly not limited to the pharmaceutical sector, an indication that more companies will soon face penalties.

Although the current drastic steps come after a prolonged period of diplomacy and engagement with the business community on the need to respect prevailing exchange rates.

Previously, businesses demanded a market determined exchange rate by refining the Reserve Bank of Zimbabwe (RBZ) Dutch Auction system in a development that has seen exchange rate equilibrium being achieved on both the parallel and official markets.

However, Treasury said it was dismayed by the continued insatiable appetite to profiteer exhibited by the business community.

“The government notes with concern that some market players continue to exhibit highly destabilizing forward pricing and speculation in outright violation of exchange control directives as well as well as standing government policy guidelines with respect to pricing and the use of domestic currency,” said Treasury.

A commitment to revamp the broad use of the local currency for domestic transactions as well as holding all violators to account was pledged amid a reinforced call directed to Government Agencies including local authorities to collect their fees and levies in local currency.

“The transacting public is encouraged to resist all forms of unfair pricing by retailers and immediately report violations to the Financial Intelligence Unit,” added Treasury.

Is the Zim Dollar resuscitation a futile endeavor?

ZimLive.com notes that Zimbabweans have been largely resentful of the local currency after savings and wages have been decimated by their country’s volatile unit.

Additionally, firms and the transacting public have placed their preferences on the US dollar to preserve the value of their investments and savings.

The government has insisted the local currency will not be scrapped amid continued demands by workers’ unions and the opposition to remove it from circulation.

However, the government has been accused of duplicity after pegging some of its services in US dollars while maintaining Zimbabwean dollar wages for the public workforce.

The government and some quasi-government agencies have tried to follow suit but have been stopped from pegging services in foreign currency.

The pronouncement to suspend or withdraw licences from the marked companies follows President Emmerson Mnangagwa’s threat to put down entities he accused of lining up an elaborate plot to sabotage his administration through alleged price manipulation.

Two of the pharmacies were accused of pricing their goods exclusively in United States dollars.

Government agencies, including local authorities, have been directed to collect their fees and levies in local currency.

President Emmerson Mnangagwa has on several occasions accused the business of sabotaging his government’s economic recovery efforts.

Since its resurrection in June 2019, the local currency has taken heavy knocks on the foreign currency auction system and failed to maintain its value against stronger currencies, with the knocks even heavier on the parallel market.

On its first day, the Zim dollar traded at US$6,32 against the United States dollar on the formal market, while on the parallel market, the local currency traded at US$13,50 against the greenback.

Why trading, in imported commodities, is rampant in US dollars?

Observers, however, argue that retail pharmacies buy drugs from wholesalers in US dollars only and to expect them to sell at an auction rate that only 13% of importers access would destroy medication delivery systems in Zimbabwe.

Economic observer group ZimBollar said the government move is tantamount to instructing pharmacies to sell their goods at a loss.

“This directive from the Ministry of Finance is informed by ignorance, arrogance, or both. Pharmacies are in retail and in the retail business, the most important statistic is the stock turnover ratio [the number of days it takes to convert stock into cash/ a sale],” read the statement.

ZimBollar added that pharmacies in Zimbabwe take anything between 6-9 weeks on average to turn over their stock into cash, meaning the rates of US$26.40-US$34.166 was a legacy rate that they incurred when they purchased stock sometime in Mid-June when the rate spiked.

Despite these consumers have generally welcomed the move to name and shame the pharmacies involved in these practices.

However, they believe that investigations should extend to top retailers as well whereby the wholesale forex auction rate is significantly lower, and retailers continue to maintain high prices.

This discrepancy raises concerns about producers’ involvement in pushing up prices in US dollars, which results in inflated prices when converted at the legal exchange rate.

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