Staff ReporterZimbabwe’s central bank has dramatically increased its main interest rate from 20% to 35% in an attempt to stabilize the economy and curb inflationary pressures.
The Reserve Bank of Zimbabwe announced the measure following a meeting of its Monetary Policy Committee (MPC) on Friday.
The move comes as the southern African nation faces renewed pressure on its exchange rate, despite experiencing a period of relative stability earlier in the year.
According to the central bank, month-on-month inflation averaged -0.82% between May and July 2024. However, inflation rose to 1.4% in August and is expected to increase further in September.
The bank cited “a resurgence in exchange rate pressures since the second half of August 2024” as a key factor behind the decision.
In addition to raising interest rates, the central bank has increased reserve requirements for banks and tightened limits on foreign currency withdrawals for individuals.
Dr. John Mushayavanhu, Governor of the Reserve Bank of Zimbabwe, said the measures “will go a long way in addressing the emerging exchange rate risks, anchor inflation expectations and stabilise prices in the near to short term”.
The policy shift highlights the ongoing economic challenges faced by Zimbabwe, which has struggled with currency instability and hyperinflation in recent years.
Analysts say the effectiveness of these measures will depend on broader economic reforms and the government’s ability to restore confidence in the country’s financial system.
The central bank has pledged to “remain vigilant to any emerging risks” as it seeks to maintain macroeconomic stability in the face of persistent economic headwinds.
