Retail pharmacies, which the central bank has threatened with severe penalties for manipulating the local currency, have pleaded their innocence on the issue arguing they are only price takers in a bigger market.
The Reserve Bank of Zimbabwe (RBZ) on Wednesday warned it would take action against pharmacies and schools that are violating foreign currency rules and abusing the Bank Use Promotion Act.
But industry players said the central bank was aware of what the pharmaceutical’s annual foreign currency requirements were and if this was met, the pricing “madness” in the sector would disappear.
Notably, though, the RBZ has reportedly not implemented its plans in terms of which it intended to make specific and regular allocations to the pharmaceutical sector for key imports.
This week, RBZ governor Dr John Mangudya said the apex bank’s Financial Intelligence Unit (FIU) was investigating cases of currency manipulation by some traders in the country.
This comes against the backdrop where a significant number of registered businesses are reportedly indexing their prices to black market rates despite getting forex from the auction.
Instances abound of traders who quote varying prices between payment in US dollars and settlement using the domestic currency, which often sees prices that reflect huge premiums.
Dr Mangudya said the central bank would deploy all tools available to it, including fines, freezing of bank accounts, and blacklisting culprits from enjoyment of financial services.
Since inception of the foreign currency auction system on June 23, 2020 to December 2021, US$2,5 billion has been allotted to key sectors of the economy with US$2,2 billion disbursed through the main auction and US$358 million through the SMEs auction.
But pharmacists still insist they are not getting adequate supply of forex.
Pharmaceutical Society of Zimbabwe president Portifa Mwendera said the central bank knew the industry’s forex needs and should simply provide adequate funds to resolve issues in the sector.
“ . . . allocations that do come through (from the auction), unfortunately, do not meet the requirements of the industry. Mostly, the allocations for forex are usually directed at the importers (not pharmacies),” Mr Mwendera said.
He said retailers’ pricing reflected prices charged by wholesalers/ importers, who were not getting enough supplies from the auction and used the alternative market to supplement the auction funds.
“You find that most retail pharmacies are not importers. Most pharmacies, about 98 percent, get their products from local importers; just a few are importing.
“The pricing, I think, is where the major issue is, to say are people using the official RBZ exchange rate? He said even importers of medicines and pharmaceutical products were not getting adequate forex to cover their needs while a good number of service providers, including transport services and rentals, were indexed to the US dollar parallel rate.
“Pharmacies are at a disadvantage in that most of their products are already denominated in US dollars and have to determine the RTGS price on the daily price that they get,” he said.
Mr Mwendera said what was happening in the retail pharmacy sector was akin to the situation across other retail industries where the pricing was not aligned to the official rates.
“They display a sign which says if you are buying in US dollars, we give you a 50 percent discount, and they have called that a loyalty discount, it generally means they are not using the bank rate,” he said.
“For pharmacies, we know the prices in US dollars, because that price is an international price, the challenge is when you have to find what the RTGS price is, and it depends on the trading position.
“The Zimbabwe dollar traded at $108,66 to the US dollar at the last auction in December last year, but the black market rate has continued to run and now hovers around $220/US$1.
A member of the RBZ monetary policy committee who requested anonymity said most pharmacies in the country operated “like tuckshops” and did not seem to operate like businesses “in the mainstream economy”.
He, however, admitted that pharmacies buy from wholesalers who sell to them in foreign currency.