IMAGE: ZIMBABWE STORE
Aaron Ufumeli  /  AFP-Getty Images
A policeman stands guard at a display before the arrival of Zimbabwe President Robert Mugabe for the opening of the "People's shops" in Harare on Wednesday. The shops are meant to counter hyperinflation and shortages.
updated 7/17/2008 12:52:29 PM ET 2008-07-17T16:52:29

Official inflation soared to 2.2 million percent in Zimbabwe — by far the highest in the world — and has shot as high as 70 million percent in the past year for some basic goods sold on the black market, the nation's central bank said Thursday.

Worsening shortages of basic goods, and the deadly political and economic turmoil surrounding the national elections March 29 and a disputed presidential runoff vote June 27, helped spur the spike in inflation in recent months.

The last announcement of official annual inflation, in February, put the rate at 165,000 percent.

Zimbabwe Reserve Bank Gov. Gideon Gono announced the new figure of 2.2 million percent at the launch of a program to sell subsidized food through selected shops and a system of coupons issued to the needy, state radio reported Thursday.

The central bank also released a schedule showing what it called distortions in prices caused by black market trading and profiteering by businesses.

It said laundry soap on the black market went up by 70 million percent, cooking oil by 60 million percent and sugar by 36 million percent — far higher than the official inflation rate of 2.2 million percent calculated by the Central Statistical Office on basic goods subject to price regulation and price increases approved by state National Prices and Incomes Commission.

Private estimates higher
It acknowledged that private consultants calculated overall real inflation closer to 12.5 million percent. The bank attributed black market inflation to shortages of hard currency that pushed the black market exchange rate to at least 90 billion Zimbabwe dollars for a single U.S. dollar, compared to the official bank exchange of 20 billion to dollar.

It said a 4-pound bag of sugar cost about 20 billion Zimbabwe dollars — $1 — at the government's fixed price, and 90 billion on the black market $4.50 at the bank exchange rate, or $1 at the black market exchange — in a country where unskilled workers earn up to 200 billion Zimbabwean dollars, about $10, a month.

However, few have jobs: unemployment has reached 80 percent.

The price of scarce gasoline has soared, along with commuter bus fares that often exceed monthly earnings, forcing workers to walk to their jobs, or sell vegetables and other goods on the streets to make up the shortfall.

The economy was a key concern in the first round of presidential voting March 29, when opposition leader Morgan Tsvangirai beat longtime leader Robert Mugabe and two other candidates but did not win the 50 percent plus one vote necessary to avoid a runoff.

Tsvangirai later pulled out of the runoff because of a campaign of violence against his supporters. Mugabe went ahead with a June 27 vote widely denounced as a sham. Tsvangirai's name was kept on the ballot and Mugabe was declared the overwhelming winner.

Mugabe promises food baskets
Launching the subsidized food program on Wednesday, Mugabe said basic commodities subsidized by the central bank were to be distributed across the country, enabling an average family to pay just 100 billion Zimbabwe dollars, about $5, for a basket of items — including cooking oil, the cornmeal staple, flour and soap — that would last a month.

At present, a single loaf of bread costs nearly 100 billion Zimbabwe dollars.

It was not immediately clear how the central bank would finance the subsidies, with health and other public services already facing collapse because of lack of state funding.

Mugabe said profiteers who abuse the scheme will face jail, the state-run Herald newspaper reported Thursday.

"It is our responsibility to stand in defense against threats to the welfare of our communities, particularly in the areas of food availability and accessibility to other necessities," Mugabe said.

"We don't want people behind bars. ... We would want our prisons to be empty than full but, alas, just now they are brimful and we don't know what to do," Mugabe said, according to The Herald, a government mouthpiece.

The launch of the scheme at a warehouse in southern Harare where subsidized goods were stored, including many imported basics, follows several government announcements about plans to open "People's Shops" to ease economic hardships and cushion the impact of hyperinflation.

Food shortages have left shelves bare in most established stores and supermarkets. Many factories hard-hit by the economic crisis have shut down, and remaining manufacturers operate at below 30 percent of their capacity, according to the private Confederation of Zimbabwe Industries.

Self-sufficient in cooking oil, soap, toilet tissue and other products as recently as 2006, Zimbabwe now imports such goods mostly from Egypt, Iran, Malaysia, China and neighboring South Africa.

Independent civic groups, meanwhile, report cheap goods already distributed earlier this month to designated shops in provincial towns being sold only to buyers carrying ruling party membership cards.

Copyright 2008 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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