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By Nelson Banya

ZIMBABWE said on Tuesday its inflation slowed to an annualised 6,592.8 percent in August, an improvement likely to be trumpeted by President Robert Mugabe as a sign his radical price freeze programme was bearing fruit.

But analysts cautioned the easing in inflation, which was down from 7,634.8 percent in July but still the highest in the world, was unsustainable amid an economic crisis that has forced many Zimbabweans to do their shopping on the black market.

The growth of the informal economy has blossomed since June when Mugabe's government ordered businesses to cut and freeze prices for milk, bread and other consumer items in a bid to tame the southern African nation's runaway inflation.

Store owners responded by refusing to restock shelves, worsening the chronic shortages that have become a staple of life for millions of Zimbabweans in what was once one of the continent's most prosperous nations.

"Inflation has come down on a technicality because of the price controls, but in reality people are buying goods on the black market at a premium," David Mupamhadzi, a leading economic commentator, said after the release of the inflation data.

The government's Central Statistics Office (CSO) attributed the improved inflation figures to a sharp slowdown in prices for food and non-alcoholic beverages, both of which were targeted in Mugabe's price freeze crackdown.

As part of the effort to enforce the new price regime, police fanned out across the country, fining and arresting thousands of business owners for violating the new regulations.

Mugabe, 83, who has been in power since independence from Britain in 1980, also accused some executives of trying to sabotage the price controls in league with Britain and other Western powers, who he claims are trying to oust his government.

The CSO added that month-on-month inflation also slowed to 11.8 percent in August, compared to 31.6 percent in July.

"With price controls in place, it was to be expected that the inflation figure would come down, but inflationary pressures remain very high in the economy," Brains Muchemwa, an economist with banking group Genesis, said.

Critics, particularly within the main opposition Movement for Democratic Change, said the price and wage policy had deepened an economic crisis that is almost a decade old.

Millions in Zimbabwe face rising poverty and unemployment, with joblessness around 80 percent, and those with jobs have to queue for hours to get to work or buy scarce basic foodstuffs.

The misery has prompted the Congress of Trade Unions to call a two-day strike starting on Wednesday. A national work boycott fizzled earlier this year in the face of threats of a crackdown by security forces. - Reuters

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