Financial Gazette (Harare)
2 August 2007
Harare — THE International Monetary Fund (IMF) this week said Zimbabwe's year-on-year inflation rate could reach over 100 000 percent by the end of the year, news agency reports said, casting a pall on economic reforms by the government and reinforcing fears of an unprecedented economic meltdown.
The IMF forecast is an upward revision of forecasts made by the Bretton Woods institution on Zimbabwe early this year.
"If recent monthly trends continue, (IMF) staff project that year-on-year inflation could well exceed 100 000 percent by year-end," Abdoulaye Bio Tchane, director of the IMF's Africa department, told Reuters in an interview.
"Economic prospects are bleak, staff projects that GDP will continue to contract in 2007 and inflation will spiral higher," said Bio Tchane. "Price controls that are being enforced are likely to exacerbate shortages and ultimately fuel further inflation."
Zimbabwe, grappling with its worst economic crisis ever, is in an inflationary abyss that had disrupted all economic activities in the country.
The year-on-year inflation rate for May topped 4 500 percent, but remained unannounced following a government directive ordering a blackout on inflation statistics from the Central Statistical Office.
But reports in the past week indicated inflation could have scaled to an unprecedented 13 000 percent.
The highly inflationary environment had resulted in a loss of faith in the domestic currency due to an increasing erosion of value.
To preserve their wealth, Zimbabweans have resorted to buying assets and foreign currency, triggering a battering of the domestic currency and consequently pushing inflation upward.
Increasing market shortages in the crisis-sapped economy have compounded the country's inflationary woes.
Scarcity, by nature, generates inflation.
Low capacity in the productive sector has resulted in dwindling output, resulting in shortages.
The country is battling acute shortages of fuel, maize meal, the country's staple food, and basic commodities such as sugar and cooking oil.
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