Zimbabwe inflation could top 24,000 per cent by December: economist

Jun 3, 2007, 13:27 GMT

Harare/Johannesburg - Inflation in crisis-ridden Zimbabwe could reach a staggering 24,136 per cent by December, official media reported Sunday.

At 3,714 per cent, Zimbabwe's annual inflation rate is already the highest in the world.

But an economist writing in the state-controlled Sunday Mail newspaper predicted the rate would rise much, much further, if current trends continue.

'If the month-on-month inflation rate persists at around 58.6 per cent,' economist Brains Muchemwa said, 'then the year-on-year will be ringing 24,136 per cent come December 31, 2007.'

'Even if month-on-month inflation can be tamed to 45 per cent, the annual inflation rate will still top 11,730 per cent by year end,' said Muchemwa, who is employed by a local investment bank.

These figures are much higher than those set out by the International Monetary Fund (IMF), which has predicted the annual inflation rate in Zimbabwe would reach 6,400 per cent by next year.

Zimbabweans have become used to - though far from happy with - climbing inflation rates since the turn of the century, when agricultural production dropped following President Robert Mugabe's launch of a controversial reform programme.

But rates and prices have soared unbelievably in the past three weeks. This weekend bread prices rose again, to 20,000 Zimbabwe dollars per loaf. At the beginning of the week, one loaf was selling for around 9,500 dollars.

Negotiating with business leaders and labour unions in a last- ditch bid to stabilize the economy last week, the government said it wanted to bring month-on-month inflation down to 25 per cent by December.

But in a gloomy forecast unusual for a state-controlled newspaper usually forced to toe the government line, Muchemwa said that inflation was feeding on itself because retailers and businesses were increasing prices by huge margins in anticipation of fresh hikes in inflation figures.

Meanwhile, the Zimbabwe dollar has sunk to record lows on the parallel market for foreign exchange, it has emerged.

The Zimbabwe dollar is now trading at at least 50,000 to the greenback, the Sunday Mail said. Dealers in Harare however say the figure is as high as 65,000.

The local unit is still quoted at 250:1 on the official, government-controlled market, though sellers of foreign exchange are given a preferential rate of 15,000:1 at commercial banks.

'Sliding of the local currency against major currencies has been happening for some time now, but the extent of last week's decline is absolutely ridiculous,' columnist Stanley Makombe said.

'One just wonders whether what is going on in our economy is real or it's fiction,' he added.