After seeing the country’s inflation rise to 191.6% in June, Zimbabwean monetary authorities said they have resolved to increase the benchmark interest rate to 200% per annum. In addition, the central bank said it will introduce gold coins which will act as an instrument that will “enable investors to store value.”
Discouraging Speculative Borrowing
Monetary authorities in hyperinflation-stricken Zimbabwe reportedly plan to hike the benchmark interest rate to 200% per annum, one of the highest in the world. According to an official quoted by Bloomberg, this plan is expected to help put the brakes on the country’s runaway inflation. The latest data from Zimbabwe’s statistical body shows the country’s inflation rate now stands at 191.6%.
Explaining the rationale behind the planned move, Persistence Gwanyanya, a member of the Reserve Bank of Zimbabwe (RBZ)’s monetary policy committee, said that by hiking the benchmark rate the central bank will discourage speculative borrowing. Gwanyanya added:
At a time when banks were still adjusting their interest rates, they will be confronted with steep rates.
Before this latest announcement, the RBZ had on June 17 asked banks to cease lending at rates below 80% starting on July 1, 2022.
Gwanyanya is also quoted in the same report conceding that the central bank’s initial year-end inflation target of between 25% and 35% can no longer be achieved. Due to the effect of what he called “external shocks,” the monetary policy committee has now upped its inflation rate forecast to a figure that is above 100%.
Gold Coins as Alternative Store of Value
Meanwhile, in a statement, the RBZ said its monetary policy committee (MPC) had resolved to introduce “gold coins into the market as an instrument that will enable investors to store value.” According to the statement, the gold coins will be produced by the country’s sole buyer of gold and will be “sold to the public through normal banking channels.”
In addition to recommending the minting of gold coins, the MPC is resolved to hike the medium-term accommodation interest rate from 50% to 100%. On the other hand, the “minimum deposit rate for ZW$ savings is set to be hiked from 12.5% to 40% while the minimum rate for local currency time deposits is set to jump from 25% to 80%.”
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Terence Zimwara is a Zimbabwe award-winning journalist, author and writer. He has written extensively about the economic troubles of some African countries as well as how digital currencies can provide Africans with an escape route.
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