The Zimbabwe government has increased wages of the civil service by between 200 and 300 percent, just seven weeks before a general election on March 31. Economists say the pay and pension increases will further increase the rate of inflation.
Last week the Zimbabwe Reserve Bank acknowledged that inflation was no longer decreasing, and there was a small rise in January.
Last year, inflation dropped month by month from an annual rate of more than 600 percent to 132 percent by year end.
The Reserve Bank predicted it would be able to bring inflation to double figures by the end of this year.
Meanwhile, the Zimbabwe government has given civil servants, including members of the security forces, massive pay hikes. Among those to receive pay increases are traditional chiefs, many of whom have also been given pick-up trucks for the first time.
Several thousand people who may have supported liberation war efforts more than 25 years ago are also destined to receive a one-time gratuity according to official documents. Registered veterans of the same war are also set to have the value of their monthly pension and benefits doubled, according to reports in the state-controlled press.
Agricultural subsidies are still being negotiated at the central bank, but farmers groups say that they will be the highest ever because of rising costs of material and low prices for Zimbabwe's main export crops tobacco and cotton.
Zimbabwe's foreign currency reserves are at an all time low and only about 10 percent of demand for hard currency was met at last Thursday's auctions at the central bank. According to importers, the black-market rate for US dollars is rising every day and is now at least 60 percent higher than the official rate quoted by the central bank.
An economist at an international accounting company who asked not to be named says the central bank's latest inflation figure was too low by several percentage points. He said even though Zimbabwe's economy declined last year it had become more stable. He said the latest inflation figures and government pay increases mean the rate of decline is now unpredictable.
Last month, the central bank predicted an economic recovery and a growth rate of three to five percent for 2005.