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| author/source:Reuters |
| published:Tue 10-Oct-2006 |
| posted on this site:Tue 10-Oct-2006 |
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| Article Type : News |
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| Main lending rate raised to 500 percent |
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Harare - Zimbabwe's annual inflation slowed to 1023.3 percent year-on-year in September, down from a record 1,204.06 in August but still the world's highest, official data showed on Tuesday. The Central Statistical Office (CSO) said the decline was largely due to technical factors following a large monthly increase in the same month last year. "You had September 2005, which had one of the highest increases on a monthly basis, which was not repeated this year. So technically this contributes to the lower figure of annual inflation," Moffat Nyoni, CSO acting director, said. Zimbabwe's soaring inflation is seen as a major stumbling block to pulling the country out of an 8-year recession, marked by chronic shortages of foreign currency, fuel and food, and attributed by critics to mismanagement by President Robert Mugabe's government. The data came a day after central bank governor Gideon Gono raised the main lending rate by 200 percentage points to 500 percent.
On July 30, Gono slashed the rate by 550 percentage points to 300 percent, citing a need to balance "the virtues of anti-inflation demand management and the continued flow of credit to the productive sectors of the economy." But Gono warned a month ago that interest rates were likely to be hiked again to tame galloping inflation. He argues that such a move would discourage speculative borrowing for investments on the stock market and foreign currency black market trade. The CSO said that, on a monthly basis, Zimbabwe's consumer price index rose 14.8 percent in September compared with a 25.1 percent increase the previous month. Urban residents have been the hardest hit by the recession and have had to contend with shortages of foreign exchange, fuel and food, rising unemployment and grinding poverty, which has fanned political tensions and fears of unrest. Analysts say Zimbabwe needs to boost industrial and agricultural production to generate criticially needed foreign currency and to stabilise prices. They say the central bank's efforts to tame rampaging inflation through tighter monetary policy will fail unless the government curbs excessive spending.
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