Zimbabwe inflation soars to 231 million per cent

HARARE: Zimbabwe's annual inflation rate soared to 231 million percent in July, a state newspaper said Thursday, confirming the daily hardships of a nation driven into poverty and trapped in a political impasse.

Staggering increases in the price of bread and cereals were the main reason for the jump from the June rate of 11.2 million percent, the Herald said, citing the Central Statistical Office.

Shortages of wheat are driving up bread prices, the paper said, compounding the struggle to avoid hunger in a country where the United Nations estimates more than five million people -- nearly half the population -- will need food aid.

On a monthly basis, the paper said prices skyrocketed by 2,600.2 percentage points in July, compared to 839.3 percent the month before.

Harare-based economist Best Doroh said the actual inflation figure could be much higher, as a shortage of foreign currency has caused the value of the local unit to plummet daily.

"The root cause is exchange rates which are shifting rapidly as the local dollar loses value," Doroh told AFP.

"Foreign currency is scarce. There is not much inflow as industry is not producing. If nothing is done to address the root cause of foreign exchange... everything else will be in vain," he said.

Economic analyst Witness Chinyama, who writes a column for a local financial weekly, said the country's only hope was for the government to embark on dramatic economic reforms.

"We hope the new government is put in place and that there will be political will to implement sound economic policies," he said.

Hopes rose for an end to Zimbabwe's political crisis when 84-year-old President Robert Mugabe and opposition leader Morgan Tsvangirai signed a power-sharing deal on September 15.

But talks on forming a unity government have bogged down in disputes over who should control the most important ministries, such as defence, home affairs and finance.

Once hailed as a model economy and a regional breadbasket, Zimbabwe's fortunes have nosedived since 2000 when Mugabe seized white-owned farms and handed them over to landless blacks, often with no farming skills.

But the government blames the country's economic meltdown on sanctions imposed by Britain and its allies, although these measures target the nation's leadership.

The currency, once on a par with the British pound, is in freefall, unemployment is at 80 percent while food and essential goods are in short supply and the vast majority of people go hungry every day.

The UN World Food Programme estimated recently that 83 percent of Zimbabweans are living on less than two US dollars a day and that 45 percent of the total population is malnourished.

Currently, one US dollar exchanges for 170 Zimdollars at the official rate, and 8,000 Zimdollars at the black market.

The government has tried several measures -- including price controls and striking off 10 zeros from the country's currency -- to try to rein in galloping inflation, the world's highest.

To keep pace with the rising costs, shops sometimes change the prices of goods more than twice a day while long meandering queues have become a familiar sight at banks as depositors line up to withdraw cash which is rapidly losing its value.

Last month the central bank gave some shops licences to sell goods in foreign currency in a bid to ease shortages which are fuelling the black market.

At the end of September, the bank also introduced 10,000- and 20,000-dollar bank notes