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Harare - Zimbabwe's financial crisis lurched into a new phase on Thursday, as efforts to put more cash into circulation appeared to backfire into a new round of higher prices for basic goods. Government officials threatened to arrest any shop owners found to be gouging.
Zimbabwe's Prices and Incomes Commission said it has seen "rampant and unjustified price increases" since the start of the week, when the government introduced higher denomination currency and raised the daily limit on withdrawals from bank accounts.
The measures aimed to help ordinary Zimbabweans, who are struggling with the world's highest inflation rate. The country's official inflation rate is 11 million percent a year, but private financial institutions estimate it is far higher.
Godwills Masimirembwa, head of the price commission, told state radio that inspectors were out in the street on Thursday to make sure that businesses were sticking to prices approved by the commission on or before September 26.
"Any businessperson charging prices that have not been approved will be arrested and prosecuted for unscrupulous business practices," he said. "This is a serious matter."
He said the offense carries a penalty of up to five years in prison.
"Everything is crazy around here," complained Joey Austin, a Harare salesperson handling wads of old and new money on Thursday.
Political uncertainty
A letter to the Herald newspaper, a state mouthpiece, pointed out on Thursday that if a Zimbabwean put the equivalent of US$10 into a bank by electronic transfer at the official rate, it would take him at least a year and a half to withdraw it at the government's daily limit of Z$20 000.
But if that person went to the black market with the money he withdrew from his account, he could buy more US dollars to underwrite another electronic transfer for a huge profit.
The letter writer said this created "madness in the financial sector" and explained why so many people are flocking to the banks.
Indeed, huge crowds have been lining up at banks since Monday to withdraw money, spilling off sidewalks and blocking traffic.
Edward Mungofa, a private business consultant, said the economy is suffering because of political uncertainty over Zimbabwe's stalled negotiations on forming a new power sharing government.
"The financial markets are on a roller coaster," Mungofa said.
President Robert Mugabe and the opposition led by Prime Minister-designate Morgan Tsvangirai signed a power-sharing deal September 15, but have since been unable to agree on which party should control key Cabinet posts - among them that of finance minister.