low of -7,7% by December 31st in 2009 year on year inflation swelled to 6, 1% in May before easing at 5, 3 % in June. This represents a reversal of the positive trends witnessed in 2009 and threatens to worsen the plight of Zimbabwe’s poor against constricted real wages. With the exception of milk, eggs, cheese and hot beverages all other basic food items experienced a price increase from June 2009 to June 201021. Debt Overhang: Zimbabwe’s debt remains unsustainably high at almost US$7 billion, amounting to 150% of the country’s GDP22—by far the highest in the SADC region23. Other estimates have placed it in the region of US$7,1 billion and projected it to grow to US$9,8 billion by 201524. A year and half after the formation of the inclusive government, Zimbabwe has not moved an inch to pay, let alone clear, outstanding debt arrears. The country is thus unable to access external sources of finance to support economic recovery. Tight Liquidity: Liquidity constrains continue to be a major challenge for both business and ordinary citizens. Consequently, banks have little room to maneuver and tend to stick to risk-averse strategies. For those reasons interest rates remain high, from around 15% to as high as 30%. The fact that Zimbabwe is depending largely on the US Dollar despite relying heavily on South African imports has not helped matters. Bank loans remain short-term, thus limiting consumption and further placing a constraint on the local industry. Banks’ own risk-averse approaches expressed through stringent borrowing conditions and unwillingness to consider long-term borrowing has meant very few takers. In turn banks have had to resort to exorbitant bank charges and services fees. In real terms, due to the absence of capital liquidity, political uncertainty and other factors, local industry remains less competitive in comparison to food and other imports from South Africa. A snap survey conducted by ZIMCODD on local retail outlets revealed that they are struggling to raise cash to pay suppliers. It is no wonder that on 1 July 2010, The Zimbabwe Independent reported that Zimbabwe’s banks are heading for a major crisis— noting that 10 out 25 banks had recorded losses for the first quarter of the year. The current business reporting season is showing that companies are taking longer than expected to recover and that in fact there is a deceleration in the economy25. Trading at the Zimbabwe stock exchange continued to be depressed, hamstrung by the challenges cited above, with only five listed companies reportedly active for the most part. Policy Contradictions: Different arms of the Inclusive Government sent mixed messages to investors and other stakeholders, clearly signaling a lack of policy coherence. For instance, an embarrassing public spat between President Mugabe’s spokesperson Goerge Charamba and the Prime Minister’s Office ensued after the Prime Minister’s signing of a bilateral Agreement with South Korea. The former castigated the Prime Minister arguing that he has no legal authority to preside over such matters. This has not helped investor confidence. Contradiction in government’s approach to economic empowerment and indigenisation has also been noted.  See CSO consumer price index June 2010, released 15 July 2010. 21  This is when one is using GDP nominal value. Juxtaposed to real GDP (about 3, 6 %) the countryís debt to GDP ratio is in the region of 200%. 22  2010 Mid-Year Fiscal Review, pg 85, 98 - 99. 23  ZIMCODD, Policy Brief, June 2010, No. 3/2010 pg. 10 24  The Business Herald, 7 July 2010 25 CIVIL SOCIETY MONITORING MECHANISM (CISOMM) SIX MONTH SHADOW REPORT ON THE PERFORMANCE OF THE INCLUSIVE OF ZIMBABWE 17