Zimbabwe focusts inflation will fall to 25%

Zimbabwe forecasts inflation will fall to 25%

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By Staff Reporter

ZIMBABWE government officials are pinning their hopes for economic recovery on a "social contract" signed between the state, labor and business to tame inflation to double digits by the end of the year, state radio reported Saturday.

If targets are met, annual inflation could be brought down to 25 percent by January, from the current official rate of 3,714 percent, the highest in the world, it said.

The deal, sealed after four months of talks among the three groups, was expected to be met with skepticism, as was a program announced last month by the government to cut inflation to single-digit levels by setting up a new prices commission.

Private financial firms estimate real inflation, taking into account goods not included in the government's calculations, exceeds 5,000 percent and at present trends would likely reach 8,000 percent by the end of the year, making its reduction impossible without dramatic policy changes outside any cooperation partnership.

The social contract signed in Harare on Friday gave obligations to the three "social partners" to fight corruption and profiteering and observe restraint over price increases and wage demands.

The government would review its public spending to bring down its budget deficit and take steps to improve economic management.

The radio said the social contract, long vaunted in the state media as a cure for worsening economic woes, was signed by Economic Development Minister Sylvester Nguni and officials of the two main federations of labor and employers groups.

The Zimbabwe Confederation of Trade Unions, the main labor organization, only signed a section of the agreement relating to incomes and prices, arguing it still had to consult on other aspects with its member unions, the radio said.

Since the government-appointed prices and incomes commission was established last month with powers to jail profiteers, prices across the board have soared.

On Friday, gasoline prices rose and commuter transport fares nearly doubled. In the past two weeks, the value of the local currency on the thriving black market has moved from 35,000 Zimbabwe dollars to a single U.S. dollar to at least 50,000.

Prices more than doubled across the board last month, shown by a 100.7 percent increase - the highest on record - in the consumer price index calculated by the state Central Statistical Office.

The international benchmark for hyperinflation is a 50-percent monthly increase.

The meltdown is blamed largely on political turmoil since President Robert Mugabe ordered the often-violent seizures of thousands of white-owned commercial farms in 2000 that disrupted the agriculture-based economy in the former regional breadbasket, leading to acute shortages of food and most basic goods.

Mugabe and ministerial colleagues have frequently accused labor and business of refusing to cooperate in recovery programs in the absence of a social contract to bind economic partners. - AP

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