Prospects of a respite are dim for Zimbabweans as the southern African country’s currency continues to tumble and runaway inflation sends prices of basic goods soaring.
”Prices are just going up and nothing is being done to match the incomes with the cost of living,” says Tonderai Mukeredzi, spokesperson for the Consumer Council of Zimbabwe, a price watchdog group.
The council says the food basket for a family of six has increased by more than 200% since January.
The Zimbabwean economy, which has shrunk by 30% in the past four years, has been battling hyperinflation and critical foreign currency shortages.
The dollar has been in a freefall, sliding from an official rate of 55 to the US greenback in 2001 to 17 500 announced by the central bank last month.
But the underground market rate last week was up to 45 000, double the rate from May when one US dollar was being unofficially traded at 22 000, indicating that the Zimbabwe dollar is far from stabilising.
”Our currency will continue on a freefall and inflation will keep shooting up until the government comes to its senses to address the fundamental factors causing the currency shortages and driving inflation,” says economist Daniel Ndlela, who runs a
private consultancy firm.
The annual inflation rate soared to 254,8% at the end of July, up from 164,3% in June, according to official statistics.
It has been climbing upwards since 2000 when it stood at 55.9%, rising to 71 percent a year later. It reached 133.2% in 2002 before it shot to a record 622% in 2004.
Ndlela said currency devaluation was not the answer.
”You don’t devalue during a dire shortage of currency. You need engagement with the international community and to generate foreign currency through exports, to stabilise the currency,” says Ndlela.
Economist John Robertson attributed Zimbabwe’s woes to dwindling exports.
”The economy has lost its ability to export and other problems such as high inflation are a result of that,” economist John Robertson said saying Zimbabweans would be ”lucky” if the economy stopped shrinking further this year.
”We used to have the ability to generate our own foreign currency and now we are borrowing. We need to revive our export sector to be able to get back on track.”
Consecutive years of drought and a land reform program launched in 2000 in which some 4 000 white-owned commercial farms were seized and redistributed to landless blacks have punched a gaping hole in agricultural production, which once accounted for 40% of the economy.
Once a major exporter of tobacco, tea, coffee and beef, Zimbabwe has seen production in those areas dwindle year after year.
Finance Minister Herbert Murerwa admitted in parliament last week that targets for economic growth and inflation for this year would be missed as he requested a supplementary budget to pay wages and keep the country afloat.
Zimbabwe is also negotiating a loan of up to 500 million dollars from South Africa to be able to make payments on a 300-million-dollar loan from the International Monetary Fund (IMF). – Sapa-AFP