Zimbabwe price cuts have backfired, crisis worse

LONDON - President Robert Mugabe's attempts to control prices amid Zimbabwe's worsening economic crisis have backfired and now even the black market faces shortages, a senior British diplomatic source said on Wednesday.

"Mugabe's efforts at price control have not only backfired but they've exacerbated what is a fairly catastrophic situation anyway," said the source, who spoke to reporters on condition of anonymity.

"It displaced retail activity into the black market, where there is no control, so inflation ... is probably anywhere between 13,000 and 20,000 percent," the source said.

The Zimbabwean government said in its latest report that inflation was about 6,600 percent. That is down from previous monthly estimates but still the highest in the world.

Under Mugabe's 27-year rule of Zimbabwe has plunged from prosperity to penury. The country once called the "bread basket" of southern Africa is now suffering from persistent shortages of foreign currency, fuel and food.

Zimbabwe credits a government-imposed price freeze in June for helping to control inflation.

But the British diplomatic source said Mugabe's price-cutting attack "completely fractured the supply and production chains behind the retail sector, which were pretty fragile in any case. Companies have lost billions of Zimbabwean dollars and ... even the black market is beginning to dry up.

"We know we'll be feeding 4 million people by January or February, possibly more," he said, warning Zimbabwe was on the verge of "a really very serious food and every other kind of shortage".

Mugabe has said he will attend an EU-Africa summit in Portugal in December and the British official said that meant Prime Minister Gordon Brown would skip the event.

"If Mugabe's there then the prime minister is not," the source said. "Whatever's useful on the agenda could well be overshadowed by (Mugabe's) presence."

He stressed that Brown's stance was not an effort to derail the conference, the first EU-Africa summit in seven years, and officials hoped a solution to the dispute over Zimbabwe's representation at the summit could be found.

"We're not saying Zimbabwe shouldn't be there -- the very opposite. ... The solution, the compromise -- if compromise there is -- will not come from President Mugabe. It will have to come from the African Union and/or SADC," the source said referring to the Southern African Development Community, which supports Mugabe attending the meeting.