Zimbabwe to cut prices 'by half'

Basic goods including flour and bread will cheaper

Zimbabwe has ordered factories and firms to cut the price of basic goods and services by up to half, in a bid to tackle rampant inflation.

The price of basic commodities such as oil and bread must be reduced with "immediate effect" said the government.

But the benefit to consumers will be limited in view of overall inflation, which hit 3,700% in April on a yearly basis and 300% in the last week alone.

Manufacturers say they need to raise prices to buy foreign raw materials.

As the local currency becomes less valuable, the cost of importing raw materials becomes more expensive in relative terms for Zimbabwean firms.

Economists warn that the measures are likely to lead to shortages, as companies either stop producing because they cannot afford to, or sell their goods on the black market.

'Unscrupulous'

The new decision obliges companies and retailers to revert to prices quoted on 18 June.

Among the items to be reduced in price following the decision are oil, bread, milk, salt, sugar and newspapers.

Industry and International Trade Minister Obert Mpofu told the AFP news agency the price rises were "unscrupulous".

"Government is aware that these price increases are a political ploy engineered by our detractors to effect an illegal regime change against the ruling party and the government following the failure of illegal economic sanctions."

The US and European Union have imposed a travel ban and an assets freeze on President Robert Mugabe and scores of other top officials.

Critics blame the government - and especially its seizure of farm land - for the economic collapse.

Meanwhile, Minister of State for Indigenisation and Empowerment Paul Mangwana has told Reuters news agency that mining companies and banks would be included in new measures to make companies have a majority of black shareholders.

Parliament is to debate the Indigenisation and Economic Empowerment Bill shortly.