The Z$50,000,000 question: How long will the world stand by and allow this tragedy to continue?

At first glance, the country's cities do not seem to be in meltdown – but only because the once-strong economy has fallen so far, so fast. With inflation at 160,000%, Mugabe must surely be nearing the end. Just don't bet on it. Raymond Whitaker in Harare reports
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The Independent Online

To the casual visitor, which is what I was pretending to be in Zimbabwe, the country does not immediately appear like an impoverished autocracy. It is quite possible to drive around Harare and Bulawayo, the country's two main cities, without encountering a roadblock or seeing unusual numbers of policemen. There are potholes in the roads, sure, but unlike many parts of Africa, a 4x4 vehicle is not essential in urban areas. And at traffic lights, most of which still work, there are people selling newspapers that condemn President Robert Mugabe in the roundest of terms.

But then you notice the price of one of these papers – the weekly Zimbabwe Independent – and any semblance of normality is dispelled. The current issue costs 85 million Zimbabwean dollars, up from Z$55m last week. This Friday the vendors will probably want more than $100m.

While much of Zimbabwe's political life under Mugabe consists of pure illusion – the President blames British colonialism for anything that goes wrong, and acts as though the election defeat three weeks ago simply did not happen – nobody can escape the reality of the world's worst inflation rate. Even the Zimbabwean authorities admit it is in the region of 160,000 per cent, but independent economists believe it could be more than twice that level.

A bag of bananas costs Z$150m; a loaf Z$300m. At least, they did a couple of days ago. One housewife said she was buying groceries recently for Z$100m when there was a hitch with her cheque guarantee card. By the time she returned from sorting it out at the supervisor's desk, her bill had gone up to Z$250m. The widow of a man who worked all his life for the postal service gets a pension of Z$1,295 a month: not enough for a box of matches – possibly not even one match. A note smaller than Z$10m is small change, and anything below one million is simply scrap paper.

In most basket-case economies, paper bills are sweat-stained and rubbed to near-illegibility. Not in Zimbabwe, where the central bank's presses keep churning out crisp new notes in ever-higher denominations. The Z$50m note is a popular innovation – considerably more so than the $750,000 bill, introduced a few thousand per cent ago, which made calculations difficult – but many believe it is only government pride which is delaying the Z$100m note. Even then, Zimbabweans will have to carry sharp-edged bricks of new notes for all but the most trivial of transactions. The struggle to keep up with soaring prices – those with bank accounts can withdraw only the equivalent of a pound or two a day from the few cash machines, and often have to queue for more than a hour to do so – has driven many half-way out of the cash economy.

Above the high walls of Harare's smart northern suburbs, maize stalks often wave. Few people can afford not to grow their own food, and lawns and flowerbeds have been ploughed up for kitchen gardens. Joseph Massundah, 70, a former senior civil servant, is part of the generation that came into its own after independence in 1980. Government loans helped him buy a three-bedroom bungalow in the city's Mount Pleasant area, and both his daughters received the best education. But his pension has been drastically eroded. How does he cope?

Mr Massundah's wife still works, and when he needed expensive heart medication, their daughter living in Canada was able to help. Their other daughter, who has a good private-sector job in Zimbabwe, gets subsidised food from her employer, and passes some on to her parents. But Mr Massundah, using the borehole on his large property, has turned market gardener. "I used to sell just vegetables," he says, surveying the neat rows of runner beans, onions and squash, "but then I realised there was money to be made from selling seedlings. I can get Z$40m for 50 onion seedlings. This helps to supplement my pension," he says. "I've been lucky – I know people who get a pension that doesn't pay for the bus fare to go and collect it."

The white widow of the postal worker, who asked not to be named, was rescued from near destitution by the Freemasons, who took her into their sheltered housing complex in Harare because her son, now in England, is a member. "My son invested money for me, but now they tell me the capital is nearly all gone," said the 81-year-old. "He can't find a permanent job in England, so he's not able to help yet."

In her neat little flat, outside which she grows gooseberries and tomatoes, the widow contemplates her shrinking world. "The water bills are very high, so they took the outside tap away, and I have to use bathwater on the plants," she said. "In the flats we used to have pay-as-you-go electricity meters, but now they can't service them and we will have to pay communally in advance. The cook has left, and they can't afford to pay for security on the front gate any more."

Many of the 30,000 whites remaining in Zimbabwe – a tenth of the number in 2000 – are frail pensioners. But they can at least rely on help from abroad, as can a growing number of black Zimbabweans. It is estimated that at least three million people have left the country in the past eight years, most for South Africa.

The widow's living conditions would still seem unimaginably luxurious to 40-year-old Assalia, who is nursing a week-old baby, her seventh, in desperately poor Hatcliffe Extension, on the outskirts of Harare. She and her family used to live in a self-built breezeblock home, but in 2005 fell victim to Mugabe's Murambatsvina (clear out the trash) campaign, in which hundreds of thousands of urban poor, who tended to support the opposition Movement for Democratic Change, had their homes demolished in an attempt to drive them back to even poorer rural areas.

"We lived in the open for a month in the middle of winter, then we were forced to go to a holding camp for another month," said Assalia. "Then they dumped us here." Her 55-year-old husband Pasca lost his job at the airport because there was no transport to get to work, and he has had only odd jobs since.

With the aid of church groups, they built a shack of corrugated iron with adjoining "sitting room", which has a corrugated iron roof resting on poles, with plastic sheeting for walls. Unlike some neighbours, they have concrete, not beaten-earth, floors. Around the shack, pumpkins, tomatoes and even sugar cane grow. Pigeons and guineafowl peck in the dust, while a coop holds chickens and a pair of turkeys. The family has dug a well, and a car battery powers a battered TV.

"Two of the older children are in South Africa, trying to find work," said Assalia. "We do this and that to make ends meet. If someone buys a bag of sugar, they sell it for Z$25m a cup. But if you put out tomatoes to sell them, they can arrest you for illegal vending. I have been arrested and had my goods seized I don't know how many times."

There is misery still worse than this, however. In drought-stricken rural areas, allegiance to Zanu-PF is essential to avoid starvation. The party controls distribution of aid-agency food and gives it only to those with a membership card. Hunger, the collapse of rural health systems and one of the worst rates of HIV/Aids infection has reduced life expectancy to the world's lowest.

According to foreign experts, no economy has ever declined this fast without going through a war, which helps to explain why the cities still look relatively normal. The infrastructure has not had time to fall apart completely, but the decay is plain if you know where to look. Near Assalia's shack, for example, there is a well-equipped clinic, but it has no medicines. In Bulawayo, a new hospital stands unused because technicians sent from South Africa to install the equipment said it was too unsafe to use.

For the first 20 years of Mugabe's rule, the economy performed well. Health and education services were among Africa's best and the country was the breadbasket of the region. All those achievements have been destroyed since 2000, when the President lost a referendum on extending his powers and embarked on his present course: ruling by force, and seizing ever-greater proportions of an ever-shrinking economy. The outcome has been rampant corruption and black-marketeering. It is impossible to buy fuel without hard currency, so anyone with access to subsidised government petrol can make a hefty profit by selling some of it on. Harare residents envy the people of Bulawayo, who can make shopping trips to neighbouring Botswana, and bring back goods in demand at home. The situation has forced everyone to become a trader.

Those in favour with Zanu-PF can become extremely rich. Special rates for buying hard currency help to purchase ornate mansions and luxury cars and a country property seized from a white farmer for weekends away. Philip Chiyangwa, a former Zanu-PF MP, owns a Hummer, and boasted in the state media recently that he has a computerised, colour-coded wardrobe to match his hundreds of suits, shoes and accessories at his 30-room home in Borrowdale, Harare's smartest suburb. But the government is living on borrowed time and borrowed money. It is taking more and more from the few businesses left that earn foreign currency, mainly in agribusiness and natural resources. "It is impossible to plan, or to comply with the law," said a small businessman.

Mugabe is adept, however, at maintaining illusions, economically as well as politically. The Zimbabwe Independent, for example, can attack him all it likes, because he knows only a small urban elite can afford it. Government-owned papers such as The Herald in Harare or The Chronicle in Bulawayo cost only Z$20m, and the authorities have a monopoly over broadcasting. The situation cannot last, say his opponents – but then they have been saying that since 2000.