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Govt enforces price controls as IMF comes to town
IRIN News
December 04, 2006

http://www.irinnews.org/report.asp?ReportID=56611

HARARE - As the International Monetary Fund (IMF) kicks of its assessment mission in Zimbabwe this week, the country's courts sent two officials of a well-known bakery to prison for breaking the price control law. The IMF has repeatedly called for price deregulation, among other measures, to manage the economic crisis in Zimbabwe.

Burombo Mudumo, chief executive officer of Lobels Bakery, and Lemmy Chikomo, the manager, were sentenced last Thursday to four months in prison for breaching the Pricing of Goods Act by selling a loaf of bread for Z$300 (about US$1.19) instead of the official Z$185 (about 70 US cents), according to the official Herald newspaper.

The bakery was also fined Z$10,000 (about US$40) for flouting price control regulations. Calling the violation "unforgivable", the presiding magistrate said the sentence should deter "other would-be offenders, lest they get attracted to this fast-becoming notorious practice of overcharging".

Mudumo and Chikomo argued that their losses, and the trade and industry minister's failure to respond to their letter seeking permission to increase prices, had forced them to sell bread at a higher price without obtaining approval. A price freeze on essential goods - and crackdowns on the parallel market - is the government's answer to try and keep basic items affordable.

Zimbabwe's annual inflation rate is currently around 1,200 percent - the highest in the world - but the IMF has warned that it could exceed 4,000 percent in 2007 if current policies were maintained. Shortages of foreign currency to pay for fuel, food and other commodities, and 70 percent unemployment, have accelerated the economic meltdown.

Tony Hawkins, a Zimbabwean economist, described the prison sentence as a "measure of desperation" because the government was resorting to "draconian price controls" rather than curbing inflation. "It will send the wrong message; it will prevent businesses from making bread, which is not what - I am sure - the government wants."

On Saturday President Robert Mugabe lashed out at businesses for hiking the prices of essentials at a gathering of ZANU-PF supporters in the northern province of Mashonaland East.

A senior police officer said it was difficult to monitor retailers and wholesalers because of the shortage of manpower. "As a result, we rely very much on tip-offs from members of the public. The failure to adequately monitor shops means that businesses can increase prices on a monthly basis without anyone being brought to book," he told IRIN.

He said the police were also battling with transport operators who, despite being made to pay spot fines at roadblocks, kept on hiking fares.

A new wave of fare increases on Monday followed a rise in the price of fuel. The official price of diesel and petrol is between Z$320 and Z$335 per litre (about US$1.20 and US$1.33 per litre), but most service stations managing to obtain the scarce commodity sell at it at a minimum of Z$2,000 per litre (about US$7.98), up from around Z$1,600 per litre (about US$6.38) barely a week ago.

In 2005 Zimbabwe narrowly averted expulsion from the IMF for debt arrears by paying off US$120 million of the US$295 million it owed. The authorities said the funds had been sourced from exporters and holders of free funds rather than resorting to printing money. The country still owes the IMF about US$119 million, and there has been speculation in the local media that Zimbabwe might again face expulsion when the IMF board meets in February to review Harare's debt repayments.

Herbert Murerwa, Zimbabwe's finance minister, offered relief to workers in the 2007 budget released last week by exempting those earning less than Z$100,000 a month (about US$400) from tax.

But the windfall means little because most workers earn less than US$100 a month, and the monthly cost of living for a family of six is about US$565.

Isaac Kwesu, an economics lecturer at the University of Zimbabwe, said that by the time the new salary tax threshold came into affect in 2007, the pay value would have been eroded by inflation.

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