ZIMBABWE: Year-on-year inflation hits 1000 percent as economy faces collapse

Record ID: 858588

  • Title: ZIMBABWE: Year-on-year inflation hits 1000 percent as economy faces collapse
  • Date: 13th May 2006
  • Summary: WIDE SHOT TOBACCO SALES FLOORS ACTIVITY (5 SHOTS)
  • Embargoed: 28th May 2006 13:00
  • Keywords:
  • Location: Zimbabwe
  • City:
  • Country: Zimbabwe
  • Topics: Economic News,Domestic Politics
  • Reuters ID: LVADGQ13ONYL88G5TJW6E2H6G7G
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  • Story Text: Zimbabwe's annual inflation rose above 1,000 percent in April it was announced on Friday (May 12, 2006), dramatising the severity of an economic crisis which analysts say could trigger protests against President Robert Mugabe's government.
    "Year-on-year inflation (for April) is now 10042.19 percent," said Morffet Myoni, acting director of Zimbabwe's official statistics agency.
    Zimbabwe, in its eighth year of recession, has the fastest shrinking economy of a country outside a war zone, according to the World Bank, and the highest inflation rate in the world.
    Mugabe's government has admitted inflation, already the highest in the world at 913.6 percent in March, is one of the biggest hurdles in its efforts to reverse an economic slide which is raising fears of popular protest.
    Analysts say Mugabe has dented Zimbabwe's investment image with his seizure of white-owned commercial farms for blacks, and that government plans to acquire a 51 percent stake in all foreign-owned mines will keep external funding at bay.
    Harare-based economist James Jowa explained the multiple causes of the hyper-inflation.
    "Zimbabwe used to produce for export especially agriculture commodities. With the advent of land reform and disruption on the agriculture side that saw lots of cuts in production and reduction in exports. Also the other cause of our inflation is increased money supply because of a shrinking economy, the revenue base for the government has been going down. As a result money has been printed, I think the Reserve Bank governor did admit that at some point they had to print one trillion Zimbabwe dollars to finance payments, loan payments with the IMF. All those factors have contributed to hyper-inflation."
    As an indication that Zimbabweans were already bracing for a steep jump in the consumer price index, shop assistants at some supermarkets in the capital Harare were busy adjusting upwards prices of some commodities on Thursday, an exercise that has become a familiar ritual.
    The economic crisis is hitting residents hard.
    "It's causing a lot of suffering because right now, incomes are being eroded on daily basis, prices of goods and services are rising on a daily basis as well. What that entails is that for an average person life will become, will continue to become unbearable, so long as the situation is not addressed," Jowa said.
    Mugabe, who has ruled the former British colony since independence in 1980, denies responsibility for the ailing economy, and in turn charges sabotage by opponents of his controversial drive to forcibly redistribute white-owned commercial farms among blacks.
    Tobacco sales at one Harare auction floor, the biggest in the world, have slowed to a trickle. Farmers, who export their production and earn an official local rate for their U.S. dollar, are reportedly waiting for a huge gap between official and black market currency rates for the dollars to narrow.
    Political and economic analysts say many urban Zimbabweans have so far survived the country's long-running economic crisis through wheeling and dealing and through subsidies from relatives abroad who send money for groceries.
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