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Zim warns of power price havoc
08/03/2006 16:36 - (SA)
Harare - Zimbabwe's central bank govenor has asked the government not to hike power tariffs by 560% in one go, saying the move would wreak havoc on firms already struggling to survive in a moribund economy.
Gideon Gono told the government in a memorandum received by AFP on Wednesday that the hike which was recommended by the cabinet should be cascaded with quarterly increases of 95% and a final increase of 70%.
Gono said: "The proposal seeks to preserve the decision already taken by cabinet, at the same time supporting the economy's overall objective to vigorously fight inflation through containment of precipitious cost escalations to producers and consumers.
"The phased framework will have a more favourable signalling effect, than would be the case if we move on the basis of the big-bang approach which front-loads the realignment factor by 560% on one go," he said.
Zimbabwe's inflation rate is currently 613.2% but Gono has warned that it could peak to 800% in March before receding to below 500% in June and dwindling to a double-digit figure in 2007.
Its once-model economy has been on a downturn for the past five years, characterised by runaway inflation and shortages of foreign currency and basic commodities.
Gono said if the 560% was imposed in a single shot, it would have a "devastating effect" on other parastatals and major firms.
He warned that the "shock-therapy way would drive into extinction ... centre-pivot companies ... and major mining houses."
The southern African country's power utility, Zimbabwe Electricity Authority last hiked tariffs in 2003. Power outages are rampant across the country.
Zimbabwe generates 65% of its power from hydro and thermal generation whilst 35% is imported from South Africa, the Democratic Republic of Congo and Mozambique.
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