Zimbabwe prices fall in sign of improvement

Tue Mar 24, 2009 12:33pm EDT

* Consumer prices -3.1 percent in Feb, -2.3 percent in Jan

* Prices could fall further now inflation set in dollars

* Shops now fully stocked, basic good prices down sharply



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By MacDonald Dzirutwe

HARARE, March 24 (Reuters) - Zimbabwe's consumer prices fell in January and February after the government let shops use hard currency and abandon the worthless local money, data showed on Tuesday, a rare sign of improvement for the devastated economy.

Hyper-inflation destroyed the value of Zimbabwe's own dollar, but the new unity government of President Robert Mugabe and old foe Morgan Tsvangirai has raised hopes of rescuing the once relatively prosperous southern African country.

Data from the Central Statistical Office (CSO) showed inflation at -3.1 percent on a monthly basis in February and -2.3 percent in January. They were the first figures using U.S. dollars so there was no annual comparison.

The previous official figures showed inflation at 231 million percent in July, but economists said it rose far higher. The last time official figures showed a month on month fall in inflation was in mid-2005.

Tony Hawkins, a business studies lecturer at the University of Zimbabwe, said the latest figures were pretty much expected given the introduction of foreign currencies.

"I thought it would fall by a higher percentage but I still see it falling further in March," he said.

Finance Minister Tendai Biti last week projected inflation would fall to just 10 percent by the end of this year as the use of foreign currency helps to stabilise prices.

Shops, which had been hit by a June 2007 price freeze, are now fully stocked and prices of basic goods like bread, meat, flour and maize meal have fallen as much as 50 percent from December levels.

The new government has launched an economic recovery programme that envisages political reforms aimed at winning back donor aid, but Western countries remain cautious.

The statistics office said an average family of five people needed $552 in January for food, rent and other goods in order not to be deemed poor, but the average government worker gets an allowance of only $100 a month.

Zimbabwe seeks an urgent cash injection of $2 billion from donors to stabilise an economy grappling with unemployment of more than 90 percent and shortages of foreign exchange to pay salaries and critical imports.

Leaders from the Southern African Development Community will meet on March 30 to discuss a regional economic deal meant to help Zimbabwe's recovery. The unity government says at least $5 billion is needed for broader economic recovery.

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