US embassy cable - 04HARARE1304

UNCLAS HARARE 001304 
 
SIPDIS 
 
STATE FOR AF/S, AF/EX 
USDOC FOR AMANDA HILLIGAS 
TREASURY FOR OREN WYCHE-SHAW 
PASS USTR FLORIZELLE LISER 
STATE PASS USAID FOR MARJORIE COPSON 
 
E. O. 12958: N/A 
TAGS: ECON, EAID, EAGR, EINV, PGOV, ZI, Economic Situation 
SUBJECT: How high can prices go? 
 
1. GOZ enforcement of an overvalued zimdollar has turned 
the country into an expensive destination for anyone 
holding foreign exchange.  It is an odd turn of events in 
a country that comparative surveys has always rated one 
of the world's cheapest.  On supermarket shelves, many 
products now cost double those in the U.S. 
 
2. Here are a few noteworthy upscale examples: 
 
- Leading hotel Meikles will soon charge most customers 
US$250/night for a room.  The customary price for local 
residents in recent years was US$50-70.  The hotel says 
occupancy is ranging 12-18 percent. 
 
- Luxury safari lodge Pamushana Lodge pegged its nightly 
zimdollar resident price in recent years at US$60/person. 
It just announced a new Z$1,200,000 (US$225)/person 
tariff. 
 
- Victoria 22, a top local restaurant, is raising its 
dinner menu on Monday from Z$140,000 (US$26) to Z$180,000 
(US$34), plus drinks.  Over the past few years, dinners 
at Victoria 22 generally converted at US$10.  On a recent 
evening, the restaurant did not have a single customer, 
unheard of months ago. 
 
3. Comment: Many of these establishments depended on 
Harare's international community.  They may now have 
overreacted to inflationary pressures by pricing their 
goods or services above the supply/demand equilibrium 
intersection.  Expats at the U.S. and other embassies 
seem to be avoiding any consumptive purchases whenever 
possible.  With inflation still raging while an 
overvalued exchange rate holds steady, locals and 
foreigners alike are asking, how expensive can Zimbabwe 
get? 
 
Weisenfeld