Tue, Jul 17, 2007 - Page 6 News List

Mugabe's price cuts spur national spending spree

A NATION IN CRISIS Zimbabwean President Robert Mugabe's bid to curb runaway inflation by decree has resulted in a countrywide run on consumer products


Zimbabweans are shopping like there's no tomorrow. With police patroling the aisles of Harare's electrical shops to enforce massive government-ordered price cuts, the widescreen TVs were the first things to go, for as little as ?20 (US$41). Across the country, shoes, clothes, toiletries and different kinds of food were all swept from the shelves as a nation with the world's fastest shrinking economy gorged itself on one last spending spree.

Car dealers said officials were forcing them to sell vehicles at the official exchange rate, effectively meaning that a car priced at ?15,000 could be had for ?30 by changing money on the blackmarket. The owners of several dealerships have been arrested.

Zimbabwean President Robert Mugabe has accused business interests of fueling inflation, running at about 20,000 percent, to bring down his government.

Economists say the price cuts will only deepen the national crisis, leaving many shops bare because they will not be able to afford to restock while official retail prices remain lower than the cost of buying wholesale or importing. Mugabe has dismissed such warnings as "bookish economics."

Some businesses fear that the operation is intended to pin the blame on the private sector for Zimbabwe's economic problems as a step towards seizing control of many companies in the way that white-owned farms were expropriated at the beginning of the decade, sparking the crisis.

Parliament is expected to pass legislation in the coming weeks that will effectively give a controlling stake in all publicly traded companies to ruling party loyalists and others chosen by the government.

The impact of the price cuts was felt almost immediately as fuel virtually disappeared from sale after garages were forced to sell gasoline for ?0.23 a liter, less than they paid the state-owned supplier.

By Saturday, most minibus taxis had gone from the roads because drivers could not find gasoline. Workers waited for hours trying to get to or from their jobs.

"Factories must produce. If they don't, we will take you over. We will seize the factories," Mugabe said.

Last week, the government said it was reviving the State Trading Corp, shut down two decades ago because of mismanagement, to take over businesses that collapse or are seized. But many factories are unable to produce goods because electricity and water are unavailable for much of the day.

David Coltart, an opposition member of parliament, said the move was essentially a means for the ruling party and military to take over the economy.

US Ambassador to Harare Christopher Dell recently said that Zanu-PF was committing regime change on itself with its economic policies and that Mugabe would be gone by the end of the year.

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