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Zim inflation could top 24 000%
Fin24 (SA)
June 04, 2007

http://www.fin24.co.za/articles/economy/display_article.aspx?Nav=ns&lvl2=econ&ArticleID=1518-25_2123662

Inflation in crisis-ridden Zimbabwe could reach a staggering 24 136% by December, official media reported on Sunday.

At 3 714%, 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%," economist Brains Muchemwa said, "then the year-on-year will be ringing 24 136% come December 31 2007".

"Even if month-on-month inflation can be tamed to 45%, the annual inflation rate will still top 11 730% 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% 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 Zim$20 000 per loaf. At the beginning of the week, one loaf was selling for around $9 500.

Negotiating with business leaders and labour unions in a last- ditch bid to stabilise the economy last week, the government said it wanted to bring month-on-month inflation down to 25% 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 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 is fiction," he added. - Sapa-dpa

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