Zimbabwe is battling a down spiraling inflation rate. The official rate is 4,500 %, the highest in the world for a country not in war.
In an effort to curb inflation rates, which increased by 300 % in the last week alone, the government ordered a price cut on basic commodities such as bread, milk and oil. The price cut took effect on Tuesday. However, several struggling companies have ignored the governments order and continued raising prices.
In essence, the government is ordering factories to sell goods at prices lower than production costs. Reluctant to violate new laws prohibiting criticism of the government, one storeowner explained that it could not simply slash prices in the middle of production.
President Mugabe is blaming the West, specifically Britain, for persuading factories to defy price reduction in an effort to overthrow him. During the funeral of a top military official, Mugabe warned that if factories continued their “dirty tricks” he would seize and nationalize all companies.
In 2000, Mugabe forcibly seized white owned farms and gave them to the landless blacks. Critics blame this seizure for the present state of the economy. Furthermore, economists warn that price cut strategies will likely lead to shortages and factory closures. Economic analyst Tony Hawkins, suggests that Mugabe’s threat to seize companies is another ploy to win the 2008 election.
In the meantime, the United States and the European Union has imposed a travel ban and an asset freeze on President Mugabe and other leading officials.
For more information please see:
Yahoo – Mugabe Threatens to Seize Firms Over ‘Dirty Tricks’ – 27 June 2007
BBC – Zimbabwe to Cut Prices ‘By Half’ – 26 June 2007
Yahoo – Zimbabwe Government Orders Price Cuts – 26 June 2007
