Zimbabwe’s central bank raised its main interest rate to 70% to stabilize a plummeting currency and rein in surging inflation.
The decision is the first by the southern African nation’s Monetary Policy Committee, which was formed three days ago. The increase follows the government’s decision in June to ban the use of foreign currency and reintroduce the Zimbabwe dollar, abandoned in 2009, in an effort to manage consumer prices rising at the fastest pace in a decade.
The rate was increased from 50% “to take account of developments on inflation and the exchange rate,” central bank Governor John Mangudya said in a statement. “The bank expects inflation to start declining after the current high-inflation cycle ends, as attested by ebbing exchange-rate depreciation pressures, following the removal of the multi-currency system.”
The Zimbabwe dollar, a precursor of which was pegged to the dollar at parity as recently as February, is currently trading at almost 13 per dollar and annual inflation, which won’t be published until next February, is estimated at between 230% and 570%.
“The increase in the benchmark rate is an important step, but it’s still below the inflation rate, which is above 200%,” John Robertson, a Harare-based economist, said by phone. “I think by the end of the year, the inflation rate will still remain very high.”
Post published in: Business
This is just voodoo economics! Who would want to borrow money and invest in any business activity when interest rate charges are 70%? With inflation at 200% who would ever want to be paid in a currency that is so worthless it is losing half its value every few days!
Zimbabwe is a pariah state ruled by corrupt, incompetent, vote rigging and murderous thugs. No one in his/her right mind would want to do business with thugs and hence the reason the country’s economy is economic meltdown and will never recover as long as the country remains a pariah state.
Mnangagwa and his Zanu PF cronies rigged last year’s elections confirming the country’s pariah state status. The regime is illegitimate and it must step down to allow implementing of reforms and retain to legitimacy.