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Cablegate: Goz Adds More Price Controls

This record is a partial extract of the original cable. The full text of the original cable is not available.

UNCLAS HARARE 002876

SIPDIS

STATE FOR AF/S AND AF/EX
NSC FOR SENIOR AFRICA DIRECTOR JFRAZER
USDOC FOR 2037 DIEMOND
PASS USTR ROSA WHITAKER
TREASURY FOR ED BARBER AND C WILKINSON
USAID FOR MARJORIE COPSON

E. O. 12958: N/A
TAGS: ECON EPET EFIN ETRD AMGT ZI
SUBJECT: GOZ adds more price controls


1. Summary: The macroeconomically-challenged GOZ expanded
its price freeze list on December 28. New controls will
lead to further shortages and a burgeoning black market.
End Summary.

2. Over the past months, the GOZ has rapidly expanded its
price freeze. The latest list includes school uniforms,
tracksuits, toothpaste and a host of other products. The
GOZ is attempting to rein in inflation, which it now
officially -- and very conservatively -- pegs at 175
percent. Unlike previous controls, this latest series
fixes rates that are higher than current market prices.
For that reason, it will take several months for
Zimbabwe's inflation to lift market-determined prices to
the officially-sanctioned maximums.

3. Comment: Price controls will continue to cause rather
than alleviate high inflation. The GOZ is fixing the
prices of every item it can think of while trying to
clamp down on the repackaging game. (Bureaucrats at the
Ministry of Industry and Trade must now approve each new
product.) Unrealistically low price freezes have caused
widespread shortages, making it unprofitable to produce
maize, bread, sugar, meat, milk and cooking oil. We
expect the list of "endangered" staples to grow as firms
shut down unprofitable product lines. Low supply/heavy
demand in the informal marketplace will soon push real
inflation to hyper- or near hyper-levels.

Whitehead

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