Zimbabwe Inflation at 2.2m% and Rising

Zimbabwe's official inflation rate has escalated to 2.2m%, driving the cost of a loaf of bread to about one-third of a teacher's monthly salary.

However, independent economists were quick to dismiss the government's figure, saying the true rate was actually several times higher and rising faster than ever.

The central bank governor, Gideon Gono, yesterday announced a 13-fold increase since the last time the inflation rate was released, in February, when it was put at about 165,000%. Officials admitted the figure was only an estimate because it was now all but impossible to track the cost of individual goods.

One of Zimbabwe's most respected economists, John Robertson, said that while inflation was probably about 2m% in May, it soared again last month.

"I think the June figure is more likely to be 10m% and it could turn out 15m%," he said.

Pay has failed to keep pace with the daily increases in prices so that even those with jobs in a country with 80% unemployment are often unable to afford the bus fares to work or more than one meal a day for their families. Huge queues form outside any bakery selling price-controlled bread, but demand far outstrips supply.

Robertson said inflation was largely being driven by the collapse in the black market value of the Zimbabwe dollar against the US dollar, which sets the pricing for imports of foods and other goods.

"At the beginning of July, the exchange rate was 27m% higher than the same time last year. That becomes the floor for the July calculation. I think we're heading for 40 or 50m% inflation by the end of July," he said.

Eight weeks ago, the central bank issued a $50bn note, the largest available. At the time it was worth about ?2. It is now worth 18p.

Last year, the government tried to curb inflation with price controls that forced shops to slash their prices by up to 80%. That led to a short-lived spending spree as people bought up food, electrical goods and furniture at a fraction of their real value.

Since then the shelves of many shops and supermarkets have been largely bare, except where owners risk being caught charging prices that reflect the cost of importing goods from South Africa now that Zimbabwe's own production has collapsed.

Hyperinflation has also caused a cash shortage because the government cannot print notes fast enough to meet demand. Ordinary people are permitted to draw only $100bn (36p) a day from their banks.

The government has made an exception for soldiers, fearing unrest in the military. They are allowed to take out $1.5tn a day and the cash is delivered by the banks to the barracks.

While the parallel exchange rate for the American dollar is $270bn, the official rate remains $30,000 per US dollar. Only a select few at the top of the regime have access to buy foreign currency at that rate.

This has enabled some of them to buy luxury cars for no more than a few pounds.