THE Zimbabwean dollar plumbed to new lows last week pushing prices up as the political stalemate takes a toll on the already battered economy.

Despite signing a power-sharing agreement two weeks ago, the three political parties -- Zanu PF, MDC-T and MDC-M -- are bogged down on the allocation of key ministries. Negotiators for the three parties have failed to agree and passed the buck to the three principals: President Robert Mugabe; Prime Minister-designate Morgan Tsvangirai and deputy Prime Minister-designate Professor Arthur Mutambara.

While negotiators have haggled over key ministries, the Zimbabwean dollar has become a casualty tumbling to all-time lows against major currencies. Initially the local unit had firmed against major currencies following the signing of a power-sharing deal two weeks ago.

However, the failure by the parties to agree on ministries waned confidence in the local unit as the battered Zimbabwe dollar plunged to an all-time low.

The Zimbabwean dollar, which was changing hands at $45 against the Rand, shot up to $120 for the same unit on Thursday. The Zimbabwe dollar has also depreciated to $1 000 to US dollar from $450 the previous week. The rates on the Real Time Gross Settlement (RTGS) have also firmed from $60 000 to the US dollar to $320 000 on Thursday.

The plunge has had an effect on the prices of goods which had been reduced following the signing of the power-sharing deal. A loaf of bread whose price had been halved to $500 was back at the old figure last week. The price of a two-litre orange crush juice rose to $3 000 from $2 300 the previous week. A one-way trip into town increased by 25% to $500 last week.

Economic analysts attribute the depreciation of the local unit to a drop in confidence in the agreement signed two weeks ago.

"People's confidence has dropped a lot and exchange rates reflect that," said John Robertson, an independent economist.

"There will be more movements unless there are obvious signs of power-sharing."

Dr Daniel Ndlela of Zimconsult, an economic consultancy firm told Standardbusiness the local unit was tumbling due to the absence of confidence in the system.

"There is no confidence at all in the system. Market confidence is what you believe in... it is a self-fulfilling process," Ndlela said. "At the level where market confidence is zero and you have hyperinflation, you cannot price your goods."

Analysts propose a currency board whereby the Rand and US dollar will run side by side with the local currency. The currency board will assume central bank powers of printing money, thereby arresting inflation. But analysts were quick to point out that the new measures should be embarked upon by the new government. Already Zanu PF and MDC are tussling over the Finance ministry in what analysts say will hamper economic recovery. The MDC accuses the central bank of fuelling the parallel market activities through money printing, a charge analysts say reflects that the MDC should run the Finance Ministry.

"If the Ministry of Finance doesn't go to the MDC, the rates (exchange) will go to the roof," said economist, Professor Rob Davies.

Prof Davies says recovery chances are slim "unless there are some dramatic policy announcements".