Inflation - identified as the country's number one enemy - is seen reaching one billion percent by the end of the year unless a political solution is hammered between President Robert Mugabe's ZANU-PF and the Movement for Democratic Change (MDC) led by former trade unionist Morgan Tsvangirai, analysts said this week.

Inflation data released by the Central Statistical Office (CSO) this week put year-on-year inflation for June at 11.27 million percent, the highest in the world and quite unusual for a country not at war.

The previous month, the rate had reached 2.2 million, which means it accelerated by a massive 839,3 percent underlining the gravity of the inflationary pressures afflicting the country's economy. The latest inflation figure shows the economic meltdown is worsening with no signs that the country's rival parties, ZANU-PF and the MDC, will reach a power-sharing deal to end the crisis.

Much of the country's inflation stem from the excessive money supply growth and the funding mechanisms of the budget deficit. But economists believe the actual inflation figure is higher than the official figures.

"Our inflation figures are way above that but what it tells us is that the productive base of the economy has really shrunk. We really need to change the way we do business," said an economist at a domestic bank who declined to be named.

He said the core problem was that Zimbabwe's manufacturing sector had ground to a halt and money supply was at very high levels.

Critics have accused President Mugabe's government of printing money to finance an election campaign and prop up the economy, fuelling hyperinflation.

"What is needed is significant inflow of foreign currency, policy consistency and structural reforms in the energy sector," the economist said.

Zimbabwe is suffering from almost 80 percent unemployment and many of its people survive by bartering goods. Maize, sugar and other basic foodstuffs are in short supply.The central bank re-denominated the Zimbabwean dollar currency on July 30 by slashing 10 zeros but this has had no effect on stemming the devaluation of the currency.

When it was re-denominated the Zimbabwean dollar was trading at $140 billion to the United States dollar, or $14 in the re-denominated currency.

Currently the unit trades at $100 to the greenback, or $1 trillion in the old currency. Yesterday, the Zimbabwe Economics Society (ZES) said any delay in arriving at a solution to the political impasse that represents the will of the people might worsen the economic situation.

"We want to make a clarion dismissal of talks that build on the foundation of the June 27, 2008 presidential run-off poll results, that in fact was a one-man election," said ZES president Lovemore Kadenge.

"We as ZES want to argue that the talks should not be an issue of power but democracy, human rights, freedom, justice and economic development. The suffering we currently see was borne out of gross macroeconomic mismanagement. In as much as ZANU-PF's economic models have plundered the nation, it is necessary that they acknowledge responsibility for the economic woes and concede defeat. We expect the greatest degree of compromise from ZANU-PF. That and that alone is a litmus indicator of true patriotism," said Kadenge.

John Robertson, a Harare-based economist said the skidding exchange rate was worsening the inflation outlook.

Said Robertson: "The foreign currency cost is rising at the rate of 13 percent per day. That rate of increase will mean that prices will be one billion percent higher than they were at the same time last year. The 11 million percent year on year inflation rate could be 100 million percent by July and by about October were expect year-on-year inflation to rise to about one billion percent, that is something you cannot live with. The government is pinning hopes on the social contract. The target should not be the behavior of business and labour but their own behavior. Business is actually a victim because it is the government that is causing the dollar to shrink."

 additional reporting by Reuters