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Anti-inflation curbs on prices create havoc for Zimbabwe
Michael Wines, New York Times
July 04, 2007

http://www.zwnews.com/issuefull.cfm?ArticleID=16931

Johannesburg - Zimbabwe's week-old campaign to quell its rampant inflation by forcing merchants to lower prices is edging the nation close to chaos, some economists and merchants say. As the police and a pro-government youth militia swept into shops and factories, threatening arrest and worse unless prices were rolled back, staple foods vanished from store shelves and some merchants reported huge losses. News reports said that some shopkeepers who had refused to lower prices had been beaten by the youth militia, known as the Green Bombers for the color of their fatigues. In interviews, merchants said that crowds of people were following the police and militia from shop to shop to buy goods at the government-ordered prices. "People are losing millions and millions and millions of dollars," said one merchant in Bulawayo, referring to the Zimbabwean currency, which is becoming worthless given the nation's inflation, the world's highest. "Everyone is now running out of stock, and not being able to replace it." Because the government has threatened to seize any business that does not sell goods at the advertised price, the merchant said he was keeping his shop open, but with virtually nothing on the shelves. Economists said that the price rollbacks were unsustainable and that shops and manufacturers would soon shut down and lay off workers rather than produce goods at a loss. "You can't buy eggs or bread or things of that sort," said John Robertson, an economic consultant in Harare, the capital. "Suppliers can't supply them at a price that allows retailers to make a profit." "It's pretty chaotic," he added. "But I think the impact will be worse if it stays in place."

Zimbabwe's annual inflation rate was last reported to be 4,500 percent in May, a figure the government has yet to confirm. Mr. Robertson and others say that the true rate now is probably about 10,000 percent, but official statistics apparently are no longer being released. He and others said they feared that the economic collapse would quickly lead to social unrest if Zimbabwe's already shrunken work force were hit by huge layoffs and foods like cornmeal, cooking oil and sugar became unavailable. President Robert G. Mugabe, who faces a tough election next year, has often threatened to impose price controls during Zimbabwe's eight-year economic decline, but the controls generally were short-lived and loosely enforced. In contrast, the latest crackdown appeared to be gathering momentum, as enforcers moved over the weekend to halt price increases by wholesalers and manufacturers as well as retailers.

The Ministry of Industry and International Trade ordered companies a week ago to roll back prices to the levels of June 18, a reduction of roughly 50 percent. Many initially ignored the command, but since Mr. Mugabe delivered a caustic nationally broadcast speech last week, pledging to seize the assets of industries and businesses that evaded controls, the government has more strictly enforced the order. In Mutare, on Mozambique's eastern border, store shelves emptied last week as shoppers scooped up low-priced goods once the controls took effect, said Sampson Mugari, a regional officer of the government-financed Consumer Council of Zimbabwe. He said that some staples, like beef and chicken, were sold at reduced prices this week at some local supermarkets, but he acknowledged that supplies were limited. "They tell shoppers to queue to buy whatever they have," he said. Two-liter cartons of a popular orange drink, priced at 400,000 Zimbabwe dollars a week ago, were sold for 120,000 dollars, or about 45 cents at the currency's black-market exchange rate.

Gasoline was reported to be vanishing from stations as the going price, about 180,000 dollars per liter, was slashed by the government to something closer to the officially approved price of 450 dollars per liter. Mr. Mugabe's government intends to cope with the shortages by subsidizing producers of basic goods. One of the few newspapers not under government control, The Zimbabwe Independent, reported last week that flour, which is controlled entirely by the state, will be sold to bakers for 10 million dollars a ton, half the market price. Similarly, many suppliers of basic goods have been told by the government that they will be allowed to buy gasoline at one tenth the going price, the newspaper reported. The government apparently plans to make up those losses by printing more money. Zimbabwe's dollar has lost more than half its value in recent weeks because the government has constantly issued new bills to pay its mounting debts. The Bulawayo merchant, who said he was threatened Tuesday by a government price-control official, said that prices had been doubling almost weekly at his shop. Prices for cattle at the city's auctions are well above the prices shopkeepers have been ordered to charge, he said.

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