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Zimbabwe’s Central Bank Retains Africa’s Highest Interest Rate at 35%

The Reserve Bank of Zimbabwe’s hawkish stance has supported the nation’s bullion-backed currency and helped it recover some lost ground against the dollar.

December 4, 2024
279 1 minute read
Zimbabwe’s Central Bank Retains Africa’s Highest Interest Rate at 35%
John Mushayavanhu, governor of Zimbabwe's central bank

Zimbabwe’s central bank retained Africa’s highest interest rate and affirmed its tight monetary policy stance will continue into 2025.

The monetary policy committee kept borrowing costs at 35% at its final meeting of the year, Governor John Mushayavanhu said on Wednesday.

“To ensure that inflation expectations remain well anchored, the MPC resolved to maintain the current tight monetary policy stance,” he said.

The Reserve Bank of Zimbabwe’s hawkish stance has supported the nation’s bullion-backed currency and helped it recover some lost ground against the dollar. The ZiG — short for Zimbabwe Gold — strengthened 12.7% against the US currency in November, its best month since a shock devaluation on Sept. 27 wiped out 43% of its value.

The devaluation led to a slump in government revenue, slashed workers’ earnings and sparked double-digit monthly inflation for the first time since the currency’s April debut.

It’s averaged almost 8% in the past seven months and jumped to 37.2% in October.

Also Read: Zimbabwe Devalues Currency, Raises Interest Rates to Curb Inflation

“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 ZiG, launched in April, is the nation’s sixth attempt at a functional local currency in the past 15 years. It’s backed by gold, other precious metals and foreign currency reserves held at the central bank.

Finance Minister Mthuli Ncube said last month that the nation’s fiscal authorities see monthly inflation averaging less than 3% next year.

Still, Oxford Economics said the forecast appears overly 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 the London-based research firm, wrote in a recent client note.

 

December 4, 2024
279 1 minute read
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Lawrence Baraza

Lawrence Baraza is a dynamic journalist currently overseeing content at Metropol TV Digital. With a keen focus on business news and analytics, Lawrence guides the platform in delivering insightful, data-driven content that empowers its audience to make informed decisions. Lawrence’s commitment to quality and his ability to anticipate market trends make him a key figure in the digital media landscape. His work continues to shape the way business news is consumed, making a significant impact in the field.

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