How high can prices go?

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 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