Mugabe in poll setback as inflation hits 26,470%

Published on Thursday 31 January 2008 21:19

ZIMBABWE'S inflation soared to a record high of 26,470.8 per cent as the economy contracted by 6 per cent, the central bank said yesterday – dealing a blow to president Robert Mugabe's government ahead of the general election next month.

The veteran leader will seek another five-year term on 29 March, against the backdrop of an economic meltdown widely blamed on his political and economic policies.

Gideon Gono, the governor of the Reserve Bank of Zimbabwe, said that inflation galloped to 26,470.8 per cent year-on-year in November 2007, from 7,982.1 per cent in September. There were no figures for October.

The jump in inflation prompted the central bank to increase interest rates to 1,200 per cent from 975 per cent.

"The continued threat of high inflation warrants that interest rates be periodically realigned to discourage speculative borrowing and inflationary credit expansion," Mr Gono said.

"The economy is estimated to have declined by about 6 per cent in 2007. This contraction in economic activity has been mirrored in output decline in all sectors of the economy, with the exception of a marginal increase in agricultural output."

Zimbabweans have over the past eight years grappled with shortages of food, fuel, water and electricity in a crisis many say has its roots in Mr Mugabe's seizure of white-owned commercial farms.

They say the haphazard implementation of the programme has left what was once southern Africa's bread basket struggling to feed itself.

Mr Gono said the Reserve Bank had imported food worth 71 million in 2007, up from 57 million the previous year.