According to Zimbabwe’s latest figures, inflation in the country was back under 7000% in August, after hitting a high of 7635% in July. The decline is due to a slow-down in the prices of food and alcoholic drinks, as a result of President Mugabe’s price-control program, which includes jail terms for anyone who raises prices or wages.
Unfortunately, conventional economic theory suggests that these types of price control measures have significant harmful effects. In an environment of rampant inflation, retailers must set their prices at a level sufficient to make a profit after allowing for inflation up until the anticipated date of sale. If legislation prevents them from doing this, they are unlikely to want to sell anything, and the shelves of the shops will be bare.
According to the International Crisis Group, Zimbabwe is close to complete economic collapse. 80% of the population are living below the poverty line, 25% have left the country, and food and fuel shortages are acute. Meanwhile, 83-year-old Mr Mugabe has vowed to “crush” his opponents in the elections due in 2008 – as if that is going to solve the crisis.