October 9, 2008 / 9:31 AM / 12 years ago

Record inflation pressures Zimbabwe parties

(Adds WFP, Odinga)

By MacDonald Dzirutwe

HARARE, Oct 9 (Reuters) - Zimbabwe’s annual inflation hit a record 231 million percent and prospects for rescuing the ruined economy dimmed on Thursday after the opposition said no progress had been made on forming a power-sharing cabinet.

Opposition leader Morgan Tsvangirai said he had made compromises on many issues but both sides remained divided on sharing ministries. He was nonetheless still hopeful of eventual agreement.

"We are part of this deal and very confident about this deal. There is nothing wrong with the deal, but in the process of implementing the deal we have reached an impasse, not on the fundamental points of the deal," he told a news conference.

"It’s ridiculous to say the deal has broken down because of this failure to agree on posts. Having a good agreement with a bad guy (Mugabe) is always something else."

Movement for Democratic Change leader Tsvangirai spoke hours after record inflation figures were issued. The yearly inflation figure raced to 231 million percent in July from 11.2 million percent in June.

A loaf of bread which cost Z$500 when the central bank redenominated the Zimbabwe dollar on Aug. 1, now goes for at least Z$7,000.



CRIPPLING PRICES

Many Zimbabweans have resorted to bartering goods and rely on help from relatives abroad, mostly in South Africa, for supplies of scant basic foodstuffs like maize, sugar and cooking oil.

"Millions of Zimbabweans have already run out of food or are surviving on just one meal a day and the crisis is going to get much worse in the coming months," said Mustapha Darboe, the World Food Program’s regional director for east, central and southern Africa, in a statement.

Central Statistical Office data showed that on a monthly basis, prices in July shot up by 2,600 percent, largely driven by high prices of bread and cereals.

An outline agreement signed on Sept. 15 has stalled over the most important cabinet posts, angering Zimbabweans who have had to endure the world’s fastest price rises, shortages of food, foreign currency and crumbling infrastructure. Both sides accuse each other of jeopardising the process.

"What is baffling is that the political players seem to take a cavalier attitude over the political crisis whose resolution is tied to the economic turnaround," said Eldred Masunungure, a political science lecturer at University of Zimbabwe.

"The consequences of such a rate of inflation is absolute desperation, despair and poverty. The politicians don’t seem to realise that what they do or don’t do has an effect on the economy."

Former South African President Thabo Mbeki will travel to Zimbabwe to continue his mediation, said Tsvangirai. Questions were raised over Mbeki’s ability to broker a cabinet deal after South Africa’s ruling ANC ousted him.

Tsvangirai said his MDC party had also contacted the African Union (AU) and regional grouping SADC over the stalemate and expressed confidence they will seek a speedy resolution.

Kenyan Prime Minister Raila Odinga, a fierce Mugabe critic, accused the Zimbabwean leader of dragging the continent’s name through the mud and expressed little faith in African mediation.

"...We should not be surprised at the AU’s failure to stand up for democracy. Many of our national leaders have skeletons rattling loudly in their cupboards," he said in a speech in Lagos. (Additional reporting by Nicholas Tattersall in Lagos; Writing by Michael Georgy; Editing by Matthew Tostevin)





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