No Xmas Cheer As Inflation Bites

Source from:  Zimbabwe Standard (Harare) Kumbirai Mafunda 10/18/2005

ZIMBABWEANS were last week condemned to perpetual hardships after stubborn inflation peaked at levels of 360 %, never seen in the Gideon Gono - era of concerted inflation targetting. As the economy slid deeper into calamity, Zimbabwe's annual inflation rate vaulted to 359.8% in September, representing a jump of more than 94% on August's figure of 265.1%. Although the government-run Central Statistics Office (CSO) cited rising prices of scotch carts and mobile phone airtime - as among the major causes - critics blamed high government spending and high rates of money growth. They point out at last week's payout of gratuities to former political prisoners and ex-detainees as a move that was highly inflationary. Last week government agreed to dispense more than $36 billion in unbudgeted funds to collaborators of the liberation struggle era - a critical constituency as the governing Zanu PF party begins to dole out sweeteners ahead of next month's Senate elections. "These unbudgeted expenditures have a pumping effect on money supply," said Tapiwa Mashakada, the opposition MDC's spokesperson on economic affairs. While Gono, the Reserve Bank Governor, once again vowed that inflation would reverse its upward trend, few Zimbabweans were impressed by his exuberance. The inflation rise, which has put paid to the Governor's end of year target of 80%, has dimmed hopes of Zimbabwe taming the inflation devil. Last month's rise in inflation, the sixth straight rise, resulted in economic analysts warning that the figures would remain on an upward trend and torpedoing prospects for economic recovery. Already the International Monetary Fund (IMF) has ridiculed Gono's inflation target insisting inflation will spiral to 400% by the end of the year while some independent economists told Standardbusiness that it would infact surpass the 600% mark by December. Though President Robert Mugabe's administration has singled out inflation as the biggest scourge -- and while Gono has earned himself some disciples for shooting down inflation from 622.8% in January 2004 to a record low of 123.7% early this year - critics say his attempts have largely been targeted at the symptoms rather than the causes. Analysts caution that Gono's last week claims of having enough ammunition to deal with the out-of-control inflation by next month could be far-fetched. "Inflation has become deep seated as a structural phenomenon which can only be tackled by a serious economic reform programme," remarked Mashakada. Industrialists say from September to December, the country would have received the last chunk of foreign currency receipts from cotton lint exports and even in normal years Zimbabwe runs dry of hard currency during the festive period. And with the liberalisation of imports from external funds, imported inflation is expected to rise especially as the festive season approaches, consequently pushing prices further. The loss of export earnings has also created a foreign currency shortage that is driving the parallel market. That has sent the Zimbabwe dollar on a free fall. Hard currency, which is not available on the official market, is trading on the thriving parallel market at close to $100 000 Zimbabwe dollars to 1$US. Another problem for Zimbabwe is that annual tobacco auctions - usually a key period on the country's economic calendar - closed down last week on a bleak note as growers produced yet another tiny crop that amounted to a paltry 74 million kgs - a slight increase from 69 million kgs in the 2003/ 04 season. Labour unions say high inflation means that Zimbabweans are getting less for their money. Because of the rising inflation, many workers are struggling to keep pace with daily price hikes. Although the Consumer Council of Zimbabwe recently noted that a family of six now needs $9.6 million to see through a month, very few of Zimbabwe's workers earn anywhere near $5 million. "Life has become unbearable for workers such that they are finding it difficult to have even a single decent meal a day," remarked Wellington Chibebe, the union leader of the militant Zimbabwe Congress of Trade Unions. Though local economists and the IMF cannot agree whether inflation will close the year at 600% or 400%, either way it won't be near any of Gono's projections of 80%. Enditem