/ 12 November 2006

Watchdog unlikely to get teeth into Zim inflation

The establishment of a new government watchdog to monitor prices and incomes in Zimbabwe is only likely to further accelerate the country's runaway inflation rate, according to analysts. Officials say a Bill is to be tabled in Parliament shortly for the creation of a prices and incomes commission in a country where the level of inflation crossed the 1 000% mark six months ago and now stands at 1 070%.

The establishment of a new government watchdog to monitor prices and incomes in Zimbabwe is only likely to further accelerate the country’s runaway inflation rate, according to analysts.

Officials say a Bill is to be tabled in Parliament shortly for the creation of a prices and incomes commission in a country where the level of inflation crossed the 1 000% mark six months ago and now stands at 1 070%.

”The commission will monitor pricing structures and safeguard consumers against overcharging which is one of the major drivers of inflation,” said Enock Porusingazi, a lawmaker for the ruling Zanu-PF party and chairperson of a parliamentary committee on industry and international trade.

The setting-up of the commission is the latest in a series of government initiatives designed to put a cap on inflation in Zimbabwe, such as slashing three zeroes from its currency.

But economists argue such gestures are largely cosmetic and have failed to rein in the inflation rate which stood at a world record 1 023,3% in September.

Eric Bloch, who runs a business consultancy group in the second city Bulawayo, said a tightening of price controls was likely to prove counter-productive.

”The price controls will result in shortages and goods will appear on the black market at much higher prices,” Bloch told Agence France-Presse.

President Robert Mugabe’s government first introduced price controls for selected goods four years ago to snuff out a burgeoning black market where scarce goods were sold for up to three times the state-imposed price.

The government occasionally deploys police to raid businesses and arrest price control violators who are usually released after paying a fine.

The planned law provides for the appointment of a commission ”to monitor price trends of goods and services…producing price monitoring reports and initiating corrective measures in cases of unscrupulous businesses affecting Zimbabwe’s pricing system,” according to a draft published last week.

The commission will also monitor salaries and assess the impact of salaries on the prices of goods, the bill says.

But another independent economist, Daniel Ndhlela, characterised the planned law as a desperate measure by a desperate government.

”These things have never worked anywhere and they can never work here,” said Ndhlela.

”When governments are desperate they put together these commissions and tell themselves they are going to work. What we have are prices that are legitimately following the rising cost of production.

”If the government sets up a commission to control prices, it will create price distortions. These distortions will drive manufacturers out of the normal market to the black market.”

Last month the country’s major towns and cities were hit by shortages after bakers stopped making bread in protest over the refusal by government to increase the price of bread in line with rising costs of inputs.

Several bakers were arrested for flouting government price controls while some bakers circumvented the price controls by making rock-shaped bread which did not fall under controlled commodities.

But the government has agreed to major increases in some sectors to keep pace with inflation. Last month it authorised hikes of about 500% in international air fares while commercial electricity bills rose by 270%.

Zimbabwe’s economy has been on a downturn in the last five years characterised by runaway inflation and perennial shortages of basic commodities such as cooking oil, fuel and the staple cornmeal.

Critics partly blame the crisis on controversial land reforms that have compromised food production and its boycott by traditional trading partners in the Europe Union and the United States following the 2002 presidential elections which western observers charged were rigged. – Sapa-AFP