Tendai Dube is angry and despondent as he counts the last notes in his pocket, and it is only two days after pay day. “Things are tough my friend. You can’t just make ends meet yet they say inflation is slowing down,” said Dube, sitting in the shade in a park in Zimbabwe’s capital, Harare. He had only a slice of bread for lunch. For Tendai and many of Zimbabwe’s poor majority, President Robert Mugabe’s government’s economic reforms ring hollow; they have not brought the quick relief they want.

The government says its central bank-led reforms are working, noting the slow-down in annual inflation to 251.5 percent in September from a peak of 624 percent in January, the availability of basic commodities, rising export earnings and the stabilisation of the Zimbabwe dollar. Yet for many Zimbabweans the daily grind to eke out a living continues as the price of basic goods continue to rise while wages fall behind and pensions and savings are eroded by inflation.

“How can they say inflation is coming down when prices are going up?” asked Dube, a question echoed by many unable to link the decline in inflation with the rising cost of living. Statistics from the Consumer Council of Zimbabwe show that a low income urban family of six now needs double the amount each month to cover basic costs from the Z$750,000 it did in January when the economic reforms were introduced.

Under Zimbabwe’s official fixed exchange rate, Z$1.4 million translates into $225.80 needed to survive each month. In reality, inflation has led to a black market exchange rate closer to Z$7,000-8,000/dollar, further eroding the buying power of poor families. Godfrey Kanyenze chief economist of the Zimbabwe Congress of Trade Unions said: “The rate of wage increases is not matching price rises and from a worker point of view the economic reforms have not improved the lives of Zimbabweans. And people are understandably impatient.”

Bread, milk and meat prices up

Prices of basic products like bread, milk and meat have gone up by more than 100 percent since January while rentals and building materials continue to climb. But Gideon Gono, governor of the Reserve Bank of Zimbabwe, remains upbeat, saying a slowdown in inflation will not see prices coming down, and warns that reforms will hurt Zimbabweans as the country adjusts from a speculative driven economy. “As a country we (must) stay the course of self imposed reforms, which inevitably come with painful adjustments...as we have said ‘no pain no gain’,” Gono told a monetary policy review meeting in October.

Zimbabwe, whose GDP has contracted by 30 percent in the last five years, has a jobless rate of more than 70 percent and is battling shortages of foreign exchange and fuel. The country has faced food shortages since 2001, some caused by successive droughts but others blamed on Mugabe’s controversial land seizures to resettle blacks.

Some companies have found themselves deep in debt, caught by a shift in RBZ policy on interest rates last December when they soared to over 900 percent, raising the cost of loans. Many had borrowed while rates were low for expansion and acquisitions but the RBZ says some of the money was used in speculative trade of foreign currency, property and stocks.

A year later many firms are selling assets like buildings, machinery and vehicles to repay the loans. “The monetary policy on interest rates has resulted in major debt financing costs ...,” the Confederation of Zimbabwe Industries said in a study released in October on the state of the manufacturing sector. The government has spent Z$200 billion and the central bank Z$2.1 trillion in bailing out distressed businesses. Gono says the money has saved some companies from collapse and boosted exports but the CZI said 40 firms in the manufacturing sector, which accounts for 18 percent of GDP and a third of exports, could fold this year due to a tough operating climate. .

MacDonald DZIRUTWE