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Zimbabwe's inflation hovers at a fiery 1099%
Dumisani Muleya, Business Day (SA)
December 12, 2006

http://www.businessday.co.za/articles/world.aspx?ID=BD4A339664

ZIMBABWE’s statistics office said yesterday that inflation had reached 1098,8% last month, a 28,6 percentage point rise, as prices continue to spin out of control.

Yesterday’s Central Statistical Office report came after a visit from the International Monetary Fund (IMF) brought to a head weeks of acrimony between the country’s top financial authorities over fiscal policy and unchecked inflation.

Kennedy Shonhiwa, acting director for the Central Statistical Office, told a news conference in Harare that the rate of inflation year on year was at 1098,8%, gaining on October’s rate of 1070,2%.

"This means that on average goods and services normally purchased by households for final use in Zimbabwe are 12 times as expensive in November as they were a year before," Shonhiwa said.

Zimbabwe’s inflation rate peaked at 1204,6% in August.

The items that recorded the highest increase year on year were paramedical services at 17653,7%, medical services at 3400,4% and domestic power, electricity, gas and other fuels at 2857,7%.

Economist David Mupamhadzi from the Zimbabwe Allied Banking Group warned that by the end of the year annual inflation could surpass the August record.

John Robertson, a Harare-based economist, blamed out-of-control inflation on increases in the prices of transport and medicines.

The consumer price index rose 30,1% from the previous month, up from 27,5% in October, he said.

Transport costs climbed 45% last month while drug prices grew 44% and restaurant and hotel costs surged 42%, Robertson, the director of Robertson Economics, said.

The IMF said in September that Zimbabwe’s inflation rate might surge to more than 4000% next year, while the economy would contract 5,1% this year.

Meanwhile, it emerged yesterday that a visit by the IMF last week was behind an open political clash which broke out at the weekend between the country’s finance minister and the reserve bank governor.

Finance Minister Herbert Murerwa had in his representations to the IMF mission blamed reserve bank governor Gideon Gono for "quasifiscal" policies, including the unrestricted printing of money.

The two have been fighting for control of the financial levers of state for some time.

Murewa said a fortnight ago that Gono’s "quasifiscal" operations would have to stop because they were fuelling inflation.

Murerwa’s remarks were seen widely as an attempt to impress the IMF team. However, Gono reacted to Murerwa’s statements angrily, slamming his boss for duplicity.

He released and published confidential memos from the minister directing him to print money for parastatals and grain imports.

"Misleading impressions have been created in some quarters, locally and abroad, suggesting the Reserve Bank of Zimbabwe has been engaging in quasifiscal operations, or in simple terms, the funding of parastatals and other government departments outside the national budget without consulting relevant authorities," Gono said.

"Stakeholders have been made to believe that hyperinflation this country is suffering from is a result of supposedly unbudgeted and unauthorised and obviously allegedly illegal disbursements.

"It is becoming sickening, the extent to which public figures and officials are keen to misinform the nation. If this fiction is not attended to and replaced by facts, that fiction will assume a life of its own."

The release of Murerwa’s secret memos ordering Gono to print money has embarrassed the finance minister and stunned the visiting IMF mission, which had been made to believe the Zimbabwean treasury was opposed to the central bank’s printing of money.

President Robert Mugabe has come out supporting Gono in his fight with Murerwa, whom he attacked last week for being a disciple of "bookish economics".

Zimbabwe’s economy is in its eighth year of recession after Mugabe’s failed land-reform programme cut agricultural output and export income.

The central bank devalued the Zimbabwean dollar 60% against the US dollar on July 31 in an attempt to boost exports and ease the currency shortage. The devaluation pushed up import costs, while the central bank has printed money to pay its debts, further stoking inflation. With Bloomberg

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