The Southern African country’s interest rate is now at 35% after the monetary policy committee voted to keep the same borrowing rates during its final meeting of the year.
Bloomberg reports that this would make it the highest interest rate on the African continent.
“To ensure that inflation expectations remain well anchored, the MPC resolved to maintain the current tight monetary policy stance,” John Mushayavanhu, the governor of the country’s central bank relayed via an email.
The Bloomberg report also highlights the fact that the hardline approach of the Reserve Bank of Zimbabwe has boosted the country’s bullion-backed currency and aided it in regaining some value against the US dollar.
Zimbabwe ZiG
This was done to help stabilize the economy and protect citizens from currency fluctuations and sky-high inflations.
The new currency was introduced by the Central Bank Governor, John Mushayavanhu, after the Zimbabwean dollar, the RTGS, lost three-quarters of its value in the four months leading to April.
The ZiG (Zimbabwe Gold) rose 12.7% versus the US dollar in November, its greatest month since a stunning devaluation on September 27 wiped out nearly 43% of its value.
The devaluation in September had triggered double-digit monthly inflation, a decline in government income, and a cut in worker pay, for the first time since the currency’s launch in April.
It increased to 37.2% in October after averaging over 8% over the previous seven months.
“The spike in month-on-month inflation in October reflected the once-off depreciation of ZiG against the US dollar in September 2024,” said Mushayavanhu.
The country’s fiscal authorities anticipate monthly inflation to average less than 3% in the year to come, according to assertions made last month by Finance Minister Mthuli Ncube.
Oxford Economics, however, stated that the prediction is excessively optimistic.
“Zimbabwe’s limited foreign exchange reserves, lack of access to external markets, and its tendency to rely on central bank financing to fund fiscal gaps will likely continue to place pressure on inflation and the currency in the medium term,” Lyle Begbie, an economist with Oxford wrote in a recent client note.
In November, the government of the Southern African country opted to cut down spending on its budget in response to its currency devaluation.
They decided that non-wage budget support will be revised, following the Treasury’s request to government departments regarding their spending commitments for the remainder of the year.
Some of the initiatives being considered entail reducing the cost of running its government including a 50% reduction in overseas travel and fuel allocations, as well as putting off local workshops.
