Zimbabwe faces more financial chaos as prices soar

HARARE, Zimbabwe (AP) – Zimbabwe's financial crisis lurched into a new phase Thursday, as efforts to put more cash into circulation appeared to backfire into a new round of higher prices for basic goods. Government officials threatened to arrest any shop owners found to be gouging.

Zimbabwe’s Prices and Incomes Commission said it has seen rampant and unjustified price increases» since the start of the week, when the government introduced higher denomination currency and raised the daily limit on withdrawals from bank accounts.

The measures aimed to help ordinary Zimbabweans, who are struggling with the world’s highest inflation rate. The country’s official inflation rate is 11 million percent a year, but private financial institutions estimate it is far higher.

Godwills Masimirembwa, head of the price commission, told state radio that inspectors were out in the street Thursday to make sure that businesses were sticking to prices approved by the commission on or before Sept. 26.

Any businessperson charging prices that have not been approved will be arrested and prosecuted for unscrupulous business practices, he said. This is a serious matter.

He said the offense carries a penalty of up to five years in prison.

Everything is crazy around here, complained Joey Austin, a Harare salesman handling wads of old and new money Thursday.

A letter to the Herald newspaper, a state mouthpiece, pointed out Thursday that if a Zimbabwean put the equivalent of US$10 into a bank by electronic transfer at the official rate, it would take him at least a year and a half to withdraw it at the government’s daily limit of 20,000 Zimbabwe dollars.

But if that person went to the black market with the money he withdrew from his account, he could buy more U.S. dollars to underwrite another electronic transfer for a huge profit.

The letter writer said this created madness in the financial sector and explained why so many people are flocking to the banks.
Indeed, huge crowds have been lining up at banks since Monday to withdraw money, spilling off sidewalks and blocking traffic. People are desperate to take out money to buy groceries, which can go up in price in the time it takes to put them in a shopping basket.

Edward Mungofa, a private business consultant, said the economy is suffering because of political uncertainty over Zimbabwe’s stalled negotiations on forming a new power sharing government.
The financial markets are on a roller coaster,» Mungofa said.

President Robert Mugabe and the opposition led by Prime Minister-designate Morgan Tsvangirai signed a power-sharing deal Sept. 15, but have since been unable to agree on which party should control key Cabinet posts _ among them that of finance minister.

Tsvangirai won the most votes in March elections but not enough to avoid a runoff against Mugabe. Mugabe, who has been in power since independence from Britain in 1980, unleashed state-sponsored violence that forced Tsvangirai to withdraw from the runoff vote, then Mugabe declared himself winner amid worldwide criticism.

A meeting Tuesday failed to break the deadlock.

South Africa’s new president, Kgalema Motlanthe, said Thursday he wanted his predecessor, Thabo Mbeki, to continue his efforts to mediate the power-sharing deal in Zimbabwe.

But chief Mugabe negotiator Patrick Chinamasa was quoted as saying there was no need for Mbeki to step back in.
I don’t think that the issue of allocation of ministries is a matter that can be referred (to Mbeki), Chinamasa was quoted as saying by The Herald.

We cannot, at the slightest difference in opinion, call outsiders to mediate.

Chinamasa said officials were confident of a breakthrough soon.