Zimbabwe's Inflation rate at an estimated 1.1 mil %

Weary Zimbabweans are facing a new wave of massive price increases, which have already put many basic goods out of their reach. Independent finance houses said in an assessment on Tuesday that annual inflation rose this month to 1 063 572% based on prices of a basket of basic foodstuffs.

As stores opened for business on Wednesday, a small pack of locally produced coffee beans cost just short of Z$1-billion. A decade ago, that sum would have bought 60 new cars. A loaf of bread cost Z$200-million -- enough for 12 new cars a decade ago. Fresh price rises are expected after the state Grain Marketing Board announced up to 25-fold increases in its prices to commercial millers for wheat and the corn meal staple.

The collapsing economy was a major concern of voters who dealt long-time President Robert Mugabe a defeat in March 29 elections. His challenger, Morgan Tsvangirai, topped the poll but did not win the simple majority needed to avoid a run-off. The two face each other in a second round June 27. Mugabe is to officially launch his run-off campaign with a rally at his party's headquarters in Harare on Sunday, the state-run Herald newspaper reported on Wednesday. The opposition's campaigning has been hampered by violence blamed on Mugabe's government and party. The opposition claims Tsvangirai is the target of a government assassination plot and he has been out of Zimbabwe since shortly after the March 29 first round. The government has rejected these claim.

Tsvangirai plans to return to Zimbabwe to campaign for the run-off once security measures are in place, his aides have said. Mugabe, speaking as he reviewed graduating police cadets on Wednesday, characterised the opposition as a tool of former colonial ruler Britain, a familiar campaign theme from him. He also accused the opposition of fanning violence. Independent observers have said that while there have been some retaliatory attacks by the opposition, the vast majority of the attacks have been carried out by Mugabe supporters. The opposition, "formed at the behest of Britain in 1999, is now on an evil crusade of dividing our people on political lines", Mugabe said.

The economy was on shop clerk Jessica Rukuni's mind as she left the public swimming pool in downtown Harare's central park with three disappointed children. She found the new admission price of Z$100-million -- 30 United States cents -- out of reach. "The point is that it's far too much for most people who don't get US dollars," she said. The divorcee's income is the equivalent of about US$1 a day. Her family has one basic meal a day. One kilogram of chicken more than doubled to Z$1-billion on Tuesday.

In the economic meltdown, manufacturing industries, running at below 30% of their capacity, reported growing absenteeism by workers facing soaring commuter bus fares. Economic analysts say unless the rate of inflation is slowed, annual inflation will likely reach about five million percent by October. Zimbabwe's official annual inflation was given by the government as 165 000% in February, already by far the highest in the world. The government has not updated that -- the state statistical service has said there were not enough goods in the shortages-stricken shops to calculate new figures. "The crunch is going to come when local money is eroded to the point it is no longer acceptable" in commercial activities or as earnings, especially by long-time ruler Mugabe's loyalists, said independent Harare economist John Robertson. Already, more transactions are being done in US dollars, both openly and in secret.

Robertson said sectors of the economy -- phone services, the supply chain, maintenance of equipment or manufacturing -- may collapse one at a time, but a country continues to exist even in chaos or anarchy. "In the end, a country must fall into line with international financial standards to balance its books" as experience in once-inflationary Latin American countries has shown, he said. He said that meant re-engaging with international financial institutions, lenders, donors and investors traditionally dominated globally by Western countries, the main source of hard currency.

Mugabe accuses the US, the European Union and especially former colonial ruler Britain of using their economic influence to back his opponents and bring about his ouster. He has severed ties with the International Monetary Fund, the World Bank and other financial organisations. But Mugabe's "Look East" policy to attract trade and investment from China and Asia has yielded a fraction of what is needed to halt inflation. In the fastest shrinking economy outside a conventional war zone, much of the nation's crucial savings have been used up in government borrowing and spending without corresponding productive income. "It is as though a starving man has eaten his left foot and starts eating his right foot to survive in the short term," Robertson said. Zimbabwe's economic decline has been blamed on the collapse of the key agriculture sector following the seizures, often violent and at Mugabe's orders, of farmland from white Zimbabweans. Mugabe claimed the seizures, begun in 2000, were to benefit poor black Zimbabweans, but many of the farms went to his loyalists. -- Sapa