Zimbabwean president Robert Mugabe, in an attempt to curb the country’s runaway inflation, the highest in the world at 7,600 per cent, has banned all pay raises and price increases. The changes made without consulting parliament, allow only the National Incomes and Prices Commission to authorize any pay increases. The state-run Herald newspaper said “the net effect of the changes will be to bring inflation down..”
Some analysts disagree. John Roberts is an independent economics consultant based in Zimbabwe’s capital, Harare. Nightline’s Akwei Thompson asked him what he thinks prompted Mugabe to make this move.
“The key issue that’s made him do it now is that a very large number of the public sector workers: the teachers, the army and others are about to request very substantial pay increases,”
Roberts went on to say that “government would have great difficulty meeting these demands because government tax revenues have fallen very considerably since they imposed the price increases by themselves…”
He thinks the government made the move to protect themselves from wage increases, and to use the same process to curb inflation.
Roberts said “even without the wage increases it is far short of meeting its own obligations with the tax revenues that it has.” So, according to the economist, the government has been printing substantial quantities of money so that it can meet its obligations.