20 September 2006

Zimbabwe: Inflation to Hit 4 000 Percent - IMF

Harare — INFLATION will reach 4 279 percent in Zimbabwe next year, a senior International Monetary Fund official has forecast.

This is significantly higher than Reserve Bank of Zimbabwe governor Gideon Gono's hopes for inflation to slow to 50 percent in 2007 and below 10 percent by 2008.

Siddharth Tiwari, deputy director in the IMF's Africa Department, said there were no bounds on how high inflation could rise and that any changes would depend on corrective policies by Zimbabwe.

"The country is in a difficult situation and has faced six years of continuous output decline, rising prices, increasing poverty and a decrease in public services . . . it's a tragic situation, frankly, and the prospects are grim," Tiwari told a news conference to discuss the economic outlook for Africa.

Tiwari's comments are of particular importance as they come just weeks ahead of a scheduled visit by an IMF team to Zimbabwe for routine consultations.

Official figures on Friday said annual inflation rose to 1 204.6 percent compared to 993.6 percent in the year to July, the highest in the world. The government has blamed the country's six-year recession on skyrocketing inflation but critics blame it on economic mismanagement.

Tiwari said a foreign financing package for Zimbabwe reported by the media earlier this week would help, but he stressed that without proper policies, the country would not recover. Zimbabwe unveiled on September 13 a package of foreign loans worth nearly US$500m, including a US$200m facility from China, to help ease shortages of foreign currency, fuel and food, and unemployment above 70 percent.

Most of the loans will be directed at the agricultural sector, which has been hardest hit by drought and President Robert Mugabe's backing for the seizure of commercial farms for resettlement.

The Chinese loan is the first major foreign loan issues to the country since Western donors withdrew after the land seizures.


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