Cablegate: How High Can Prices Go?
UNCLAS HARARE 001304
STATE FOR AF/S, AF/EX
USDOC FOR AMANDA HILLIGAS
TREASURY FOR OREN WYCHE-SHAW
PASS USTR FLORIZELLE LISER
STATE PASS USAID FOR MARJORIE COPSON
E. O. 12958: N/A
TAGS: ECON EAID EAGR EINV PGOV ZI
SUBJECT: How high can prices go?
1. GOZ enforcement of an overvalued zimdollar has turned
the country into an expensive destination for anyone
holding foreign exchange. It is an odd turn of events in
a country that comparative surveys has always rated one
of the world's cheapest. On supermarket shelves, many
products now cost double those in the U.S.
2. Here are a few noteworthy upscale examples:
- Leading hotel Meikles will soon charge most customers
US$250/night for a room. The customary price for local
residents in recent years was US$50-70. The hotel says
occupancy is ranging 12-18 percent.
- Luxury safari lodge Pamushana Lodge pegged its nightly
zimdollar resident price in recent years at US$60/person.
It just announced a new Z$1,200,000 (US$225)/person
- Victoria 22, a top local restaurant, is raising its
dinner menu on Monday from Z$140,000 (US$26) to Z$180,000
(US$34), plus drinks. Over the past few years, dinners
at Victoria 22 generally converted at US$10. On a recent
evening, the restaurant did not have a single customer,
unheard of months ago.
3. Comment: Many of these establishments depended on
Harare's international community. They may now have
overreacted to inflationary pressures by pricing their
goods or services above the supply/demand equilibrium
intersection. Expats at the U.S. and other embassies
seem to be avoiding any consumptive purchases whenever
possible. With inflation still raging while an
overvalued exchange rate holds steady, locals and
foreigners alike are asking, how expensive can Zimbabwe