Mugabe announces food aid as inflation goes through the roof

Zimbabwe admitted today that official inflation has soared to 2.2 million per cent.

The rate has gone as high as 70 million per cent in the past year for some basic goods sold on the black market, the state central bank said.

Worsening shortages of basic goods, and the deadly political and economic turmoil surrounding the national elections in March and a disputed presidential runoff in June, fuelled the rise.

The last announcement of official annual inflation, in February, put the rate at 165,000%.

Zimbabwe Reserve Bank governor Gideon Gono announced the new figure of 2.2 million at the launch of a scheme to sell subsidised food through selected shops and a system of coupons issued to the needy.

The central bank also released a schedule showing what it called distortions in prices caused by black market trading and profiteering by businesses.

It said laundry soap on the black market went up by 70 million per cent, cooking oil by 60 million per cent and sugar by 36 million per cent – far higher than the official inflation rate of 2.2 million calculated by the Central Statistical Office on basic goods subject to price regulation and price increases approved by state National Prices and Incomes Commission.

It acknowledged that private consultants calculated overall real inflation closer to 12.5 million per cent. The bank attributed black market inflation to shortages of hard currency that pushed the black market exchange rate to at least 90 billion Zimbabwe dollars for a single US dollar, compared to the official bank exchange of 20 billion.

It said a 4-lb bag of sugar cost about 20 billion Zimbabwe dollars (50p) at the government’s fixed price, and 90 billion on the black market.

In the economic meltdown, unemployment has reached 80% and unskilled workers still in jobs earn up to 200 billion Zimbabwe dollars (€6.30) a month.

The price of scarce petrol has soared, along with commuter bus fares that often exceed monthly earnings, forcing workers to walk to their jobs, or sell vegetables and other goods on the streets to make up the shortfall.

The economy was a key concern in the first round of presidential voting in March when opposition leader Morgan Tsvangirai beat Robert Mugabe and two other candidates but did not win the 50% plus one vote necessary to avoid a runoff.

Launching the subsidised food programme yesterday Mugabe said basic commodities subsidised by the central bank were to be distributed across the country, enabling an average family to pay just 100 billion Zimbabwe dollars (€3.16) for a basket of items – including cooking oil, the cornmeal staple, flour and soap - that would last a month.

At present, a single loaf of bread costs nearly 100 billion Zimbabwe dollars.

It was not immediately clear how the central bank would finance the subsidies, with health and other public services already facing collapse because of lack of state funding.

Mugabe said profiteers who abuse the scheme will face jail, the state-run Herald newspaper reported today.

“It is our responsibility to stand in defence against threats to the welfare of our communities, particularly in the areas of food availability and accessibility to other necessities,” Mugabe said.

“We don’t want people behind bars. ... We would want our prisons to be empty than full but, alas, just now they are brimful and we don’t know what to do,” Mugabe said.

The launch of the scheme at a warehouse in southern Harare where subsidised goods were stored, including many imported basics, follows several government announcements about plans to open “People’s Shops” to ease economic hardships and cushion the impact of hyperinflation.

Food shortages have left shelves bare in most established stores and supermarkets. Many factories hard-hit by the economic crisis have shut down, and remaining manufacturers operate at below 30% of their capacity.

Self-sufficient in cooking oil, soap, toilet tissue and other products as recently as 2006, Zimbabwe now imports such goods mostly from Egypt, Iran, Malaysia, China and neighbouring South Africa.