Zimbabwe devalued its currency by 1,200 per cent yesterday in a desperate attempt to bring the world’s highest rate of inflation under control and save the shattered economy.

But economists dismissed the measure as too little too late. They blamed President Mugabe’s policy of forcing businesses to slash prices and freeze wages for bringing the economy to its knees. “What Government devalues by 1,200 per cent?” asked Rob Davies, a Zimbabwean economist. “It’s an amazing admission by the Government that it has done everything wrong.”

The black market exchange rate surged ahead to eight times the new official rate of Z$30,000 to the dollar. “It’s too little, too late,” Mr Davies said. “It is irrelevant. It should have gone to 100,000 or 150,000, or be scrapped. But this is just going to encourage the black market and it will have no impact on reducing inflation.”

Black market traders agreed that unofficial exchange rates would soar even higher. “The black market rate is going to run wild tomorrow,” said an illegal currency dealer. “By Monday it will be at 600,000 to the US [dollar].”

The fluctuations will make it even harder for Zimbabwe to import vital food and raw materials. Samuel Mumbengegwi, the Finance Minister, did not explain to parliament why he was devaluing the currency. Mr Mugabe has previously been fiercely opposed to devaluation, and in 2002 he sacked a finance minister, accusing him of treason for suggesting it.

The country’s stricken business community has been desperate for the Government to relent on a demand that shops and businesses slash prices, often to below the cost of production. The law has been violently enforced and about 10,000 people have been arrested for violating the controls since they were introduced in June. Mr Mumbengegwi said that he was confident the controls would produce “some progress towards lowering inflation”.

He blamed the West for Zimbabwe’s economic woes. Zimbabwe’s rampant inflation was the result of an attempt “to affect regime change by former colonial powers through the use of price increases,” he said.

Yesterday the local baking industry gave warning that the supply of bread was about to run out and that 10,000 workers – half of its labour force – were being laid-off because they were forced to sell bread for less than it cost to bake. The Government has said that it has only a few days’ supply of wheat, and that 36,000 tonnes held in the port of Beira in neighbouring Mozambique is out of reach because there is no foreign currency to pay for it.

Labour unions have also cautioned of impending action over Mr Mugabe’s edict last week that forbade wage increases. Police confirmed yesterday that soldiers had been deployed with police officers into townships to crack down on black market traders.

The police and the army are regarded as among the worst black market dealers, confiscating goods from street traders and then selling them at a higher price. Yesterday, Morgan Tsvangirai, leader of the larger opposition faction, was charged with “conduct likely to cause disorder” after a tour in July of supermarkets stripped bare by shoppers taking advantage of Mr Mugabe’s price-slashing decree. Police said he was followed by a crowd of journalists and photographers, which could have led to disorder.

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