Zimbabwe's government has promised to reduce monthly inflation to below 25% from the current 100% by year-end after signing a price and wage protocol with business and labour to halt a deep recession.The Southern African country is battling its worst economic crisis that has pushed inflation to the world's highest at over 3700% as prices double every month in an economy where unemployment is above 80 percent and poverty levels rising.
Reserve Bank of Zimbabwe governor Gideon Gono has advocated for a social contract to halt rapid price increases, saying this is the only way to stabilise an economy the World Bank says is shrinking faster than any on earth.
On Saturday the official Herald newspaper published three protocols which had been agreed by labour, business and President Robert Mugabe's government. The protocols, which will initially run for a year, were signed on Friday. "Government [will] reduce monthly inflation to below 25% by the end of 2007," according to the incomes and prices protocol, adding that the budget deficit would this year fall to below 10% from 43% in 2006.
Under the agreement, business committed itself to exercise restraint in increasing prices and only resort to job cuts as a last measure while labour groups should advocate for reasonable salaries for workers and limit strikes.
According to the other two protocols, the government is required to reduce price distortions, including that of foreign currency where the local unit fetches Z$250 on the official market but Z$55 000 on a thriving parallel black market.
Economic analysts say Mugabe's government should restore property rights, ensure productivity on farms, liberalise the foreign exchange market and implement bold political reforms and end a crackdown on opponents as measures to revive the economy.
Mugabe's government has been shunned by international donors over its controversial policies, such as the seizure of white-owned farms to resettle blacks, which critics say has decimated the main agriculture sector and stoked food shortages.