John Mangudya, Governor of the Reserve Bank of Zimbabwe (RBZ), says bread prices in the country are expected to go down following a “positive engagement” with the National Bakers Association of Zimbabwe (the Bakers Association).

Bread in the country currently costs between ZWL 640 and ZWL 945, meaning one requires US$2 and up to be able to purchase one loaf using the official exchange rate which stands at ZWL 338 per US$1.

With the country only able to produce half of its total wheat requirements of 400,000 tonnes per year, it was left exposed to the effects of the Russia-Ukraine war which are reverberating worldwide. The two Eastern European countries account for a third of global wheat supplies. The war rattled financial markets and squeezed supply chains, which in turn has resulted in a surge in global inflation, adding to the pressure which was already existing due to the effects of the COVID-19.

The Grain Millers Association of Zimbabwe confirmed in March that about 50 percent of the country’s imported wheat comes from Russia.

For Zimbabwe, internal structural weaknesses had already left the country facing the risk of high inflation and economic collapse, and as such, the outbreak of the Russia-Ukraine war only worsened an already bad situation.

In a statement released on Monday, Mangudya said that the Bank held a consultative meeting with the Bakers Association on 17 June 2022 and deliberated on the cost build-up in the bread value chain.

“Taking into account the submissions by the Bakers Association and the need to stabilize the price of bread, the Bank agreed with the Bakers Association that its members would access their full requirements of foreign exchange through the weekly foreign exchange auctions for importation of inputs and procurement of the fuel for the distribution of bread across the country.”

He added, “In view of the positive engagement with the Bakers Association, it is expected that the members of the Bakers Association will review the price of bread downwards. Going forward, the price of bread will be adjusted on account of economic fundamentals that include global price trends of inputs and the movement of foreign currency exchange rate.”

Whilst the RBZ has the mandate to ensure price and exchange rate stability, this latest announcement has been met with skepticism by critics who accuse the Bank of adopting a price control model.

Inflation in Zimbabwe which stands at 132% as of May 2022 (year-on-year) has been largely influenced by exchange rate instability, and with the latter showing no signs of abating, it remains to be seen how a downward adjustment in the price of bread or any other products for that matter, will be sustained.

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