(Adds analyst comment, street comment)
By MacDonald Dzirutwe and Nelson Banya
HARARE, Jan 31 (Reuters) - Zimbabwe's inflation has soared to a record high of 26,470.8 percent and the economy has contracted, dealing a double blow to President Robert Mugabe ahead of March general elections.
The veteran leader will seek re-election for another five-year term on March 29 despite an economic meltdown that critics say is due to his skewed policies. The latest data were released by the central bank on Thursday.
Zimbabweans are also tired of the political stalemate between Mugabe and the opposition Movement for Democratic Change.
The MDC has threatened to boycott the polls if they are not pushed back to June, and is expected to announce over the weekend whether it will take part.
Either way, Zimbabweans still face the daily misery of chronic shortages of food, fuel, foreign currency and, more recently, water and electricity.
Dissent can be risky -- critics accuse Mugabe of rigging previous elections and using tough security laws to keep his opponents in check, charges he denies.
Reserve Bank of Zimbabwe Governor Gideon Gono said inflation galloped to 26,470.8 percent year-on-year in November from 7,982.1 percent in September. No inflation data for October were released.
The jump prompted the central bank to increase interest rates to 1,200 percent from 975 percent.
"The economy is estimated to have declined by about six percent in 2007. This contraction in economic activity has been mirrored in an output decline in all sectors of the economy, with the exception of a marginal increase in agricultural output," Gono said in a statement.
Breaking with his traditional live broadcasts of monetary policy statements, Gono said in a prepared statement he would announce a 24-month recovery programme aimed at halting Zimbabwe's recession after the March elections.
LITTLE HOPE
"This is nonsense, there are no solutions ... that is a very depressing (inflation) statement," said Solomon Mutombeni, a retired civil servant who survives by hawking fruit and eggs.
Critics say the economic crisis has its roots in Mugabe's controversial seizure of white-owned commercial farms for blacks and that its haphazard implementation has left what was once southern Africa's breadbasket struggling to feed itself.
In his statement, Gono said the Reserve Bank had imported food worth $142.2 million in 2007, up from $114.2 million the previous year, to bridge shortfalls in domestic output.
Analysts expressed disappointment at Gono's failure to devalue the Zimbabwe dollar, which is officialy pegged at Z$30,000 to the U.S. dollar but is trading at only one 200th of that on the thriving black market.
"It does appear as though the governor is being cautious and will only attempt to genuinely deal with the economy after the elections," said Callisto Jokonya, president of the Confederation of Zimbabwe Industries.
Gono warned that fresh price controls could lead to "another unintended catastrophic blitz exercise and fight between government and business".
The government imposed a blanket freeze on prices of all goods and services in June in a desperate bid to contain inflation, but the initiative backfired as panic buying rapidly emptied shop shelves. The controls have been gradually relaxed, but most basic goods are still in short supply. (Editing by Michael Georgy and Tim Pearce)
