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Govt is staying course on its tight monetary policy path Mangudya
Governor of the Reserve Bank of Zimbabwe, John Mangudya, speaks during his presentation of the monetary policy in Harare, on October 1, 2018. (Photo by Jekesai NJIKIZANA / AFP)


RBZ set to maintain 200% interest rate



ZIMBABWE’S central bank says it will maintain a tight liquidity situation despite growing calls by business over the high cost of lending which has crowded out private sector funding.


Monetary and fiscal authorities introduced several measures over the past few months to tame inflation and stabilise the domestic currency such as hiking interest rates to discourage borrowing for speculative purposes.

Key pronouncements made by the monetary authorities included the temporary suspension of lending, entrenchment of the multicurrency system through the willing-buyer willing-seller rate, introduction of gold coins as a store of value and an increase in the bank policy interest rate from 80% to 200%.

The bank policy rate was subsequently mandated to be the minimum lending rate with effect from 1 July 2022. Resultantly, interest rates across the banking sector have increased, with interest rates of 100% per annum and 200% per annum being adopted as minimum lending rates to individuals and corporates respectively.

Reserve Bank of Zimbabwe governor John Mangudya told delegates attending this week’s launch of the 2022 Chamber of Mines of Zimbabwe State of the Mining Industry Report that the authorities will maintain the obtaining situation as part of efforts to restore the value of the domestic currency and tame inflation.

“It is too premature for us to soften the pol icy because we do believe that this purely is about sentiments and perception, so we are going to continue with the tight monetary policy stance,” Mangudya said.

 “Government is going to continue with its value in its procurement so that there is no excess money in the economy to destabilise the exchange rate and inflation. We want to have a stable inflation environment, a stable currency environment so that at the end of the day the US$12 billion target is achievable.”

The central bank chief said the apex bank will by mid-November introduce lower-denomination gold coins to mop up excess liquidity.

 “Starting on the 15th of this month, gold coins of lower denominations of a tenth, a quarter and half will be on sale starting Tuesday next week. We are going to be taking them to the banks so that the public can start buying them. We’re doing this because we do not want to leave anyone behind. We know that the bigger denominations were elitist and we have listened and therefore we are bringing smaller denominations,” he said.

Official figures show that the month-onmonth inflation rate in October 2022 was 3.2%, shedding 0.3 percentage points on the September 2022 rate of 3.5%. Blended month-on-month inflation rate in October 2022 was 3.2%, gaining 0.7 percentage points on the September 2022 rate of 2.5%.

Year-on-year inflation rate for October 2022 decreased to 268.8% from 280.4% in September 2022 shedding 11.6 percentage points. Blended annual inflation rate of October 2022 stood at 108.7 percent, gaining 1.2 percentage points on the September inflation rate.

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