Zimbabwe’s central bank plans to hike the interest rate, already the highest in the world, to 190% to control the soaring inflation. A member of the bank’s monetary policymaking committee (MPC) announced the news as the bank seeks to put a brake on soaring inflation.
Persistence Gwanyanya, a member of the MPC, said the intention was to achieve a positive real interest rate. The annual inflation rose to 191.6% in June.
He reportedly said that “the government is expected to announce this news during the weekend.” President Emmerson Mnangagwa said his government will take steps to curb inflation and the surging price of basic commodities. The plan to hike the interest rates is among the measures to curb inflation.
According to media reports, the central bank barred banks from lending money below the official rate, currently at 80%, with effect from July 1.
Gwanyanya said, “Stability will be achieved through an aggressive monetary policy interest rate hike.” The deposit rate will also be increased to ensure that banks compensate depositors for their savings.
Gwanyanya also revealed that despite a surge in the cost of basic goods, policymakers don’t propose price controls on businesses.
Inflation in Zimbabwe
Inflation which was at 96.4 per cent in April, reached nearly 200 per cent in June because prices of cooking oil and bread increased rapidly as a result of Russia’s invasion of Ukraine. The war has also cut off a key supplier of wheat to Zimbabwe, leading to an increase in food prices.
Rising prices revive memories of hyperinflation seen more than a decade ago in Zimbabwe. The government then ditched the local currency and adopted the US dollar and South Africa as legal tender.
In 2019, the government reintroduced the Zimbabwean dollar, which has rapidly been declining in value.