Zimbabwe moderates massive price cuts on food

Zimbabwe tempered price cuts on basic foods on Friday after sweeping reductions it had announced earlier in the week threatened to ruin hundreds of companies and cause food shortages.

Zimbabwe tempered price cuts on basic foods on Friday after sweeping reductions it had announced earlier in the week threatened to ruin hundreds of companies and cause food shortages.

Price cuts of between 10 and 45 per cent on corn meal, the country's staple food, bread, meat, cooking oil and milk which were announced on Wednesday were modified to between 5 and 20 per cent in an official price-freeze order issued by the Ministry of Trade and Industry. Since Wednesday, two supermarket chains had closed several stores after being besieged by shoppers demanding goods at the reduced prices. Business leaders said the prices were below the costs of production.

The first announcement decreed that a loaf of bread should sell for Z$34.43 (4p), a drop of 33 per cent. After millers and bakers protested that it cost Z$40 to produce a loaf, the government pegged the price at Z$48.40, a drop of about 14 per cent from the current price. The cuts became effective yesterday as the government battled to control soaring inflation ahead of hotly contested presidential elections early next year.

The independent Confederation of Zimbabwe Industries (CZI) said even the modified reductions would threaten the viability of many businesses suffering high import bills and rising transport and power costs. "Bakers have had to raise their prices throughout the year to stay in business," said Jacob Dube, of the CZI. "Reduced prices will lead to closures and job losses." The price controls were expected to create shortages, hoarding and black marketeering, he said.

Howard Sithole, an economist, said the price freeze was impractical and "a populist decision to please voters". ( AP)