Nelson Banya, Reuters, Jun 5, 2008
Zimbabwe’s currency plunged to a new record low on Thursday, trading at an average 1 billion to the U.S. dollar on a recently introduced interbank market and triggering massive price increases.
Traders were quoting the Zimbabwean dollar
Analysts said the rapid weakening of the currency was being driven by inflation expectations as well as huge demand for hard currencies.
Zimbabwe’s production capacity, largely based on agriculture, has declined sharply mainly due to upheavals on commercial farms following President Robert Mugabe’s drive to seize land from whites to resettle landless blacks.
Prices of basic goods, most of which are now imported, have gone up sharply since the disputed March 29 election in which Mugabe’s ZANU-PF lost its parliamentary majority for the first time in 28 years.
Nhiwatiwa said the freeing up of the exchange rate system in the absence of improved production and amid uncertainty over the unresolved election stalemate, had seen prices rising sharply.
For instance, a loaf of bread, which cost about Z$15 million before the polls, now costs about Z$600 million.
A two-litre bottle of cooking oil costs about Z$5 billion, almost equal to an average low-income worker’s monthly wage, piling the misery on a country also grappling with food, fuel, water and electricity shortages, 80 percent unemployment and hyperinflation.
Official figures put Zimbabwe’s annual inflation—the highest in the world—at 165,000 percent in February, but analysts say the figure vaulted as high as 1.8 million percent by May.
The benchmark Zimbabwe Stock Exchange (ZSE) industrial index leapt to a new high above 900 billion points on Wednesday, from just over 1.2 billion points at the start of the year.