By 
Reserve Bank of Zimbabwe Governor Dr John Panonetsa Mangudya is enforcing high interest rates to curtail speculative buying by most Zimbabweans who are bent on reversing gains by the Monetary Policy Committee which he chairs. Unless inflation decreases, the apex bank will maintain the high interest rates through to next year.
The RBZ Governor Doctor John Panonetsa Mangudya has warned against speculative borrowing and to discourage it, decided to increase interest and policy rates if push comes to shove.
Speaking at the Zimbabwe Institute of Strategic Thinking (ZIST) breakfast recently, Doctor Governor Mangudya stepped up the fight against currency instability through increasing interest rates in line with inflation to discourage speculative borrowing and improve business confidence in the country.
At the dialogue Mangudya did his best to infuse confidence in the economy and behavior by many as fundamentals that affect the exchange rate are sound as Mangudya said, “In this country there are two demands for foreign currency, there is import demand for foreign currency, there is the foreign import demand for foreign currency, then there is also the store value import demand.Unfortunately the other one, the import demand is known. And as we meet very soon as the MPC obviously with inflation where it is we expect to find that we are going to increase further the interest rate, policy rate, what that means because when we put a policy it means none of you are going to get money with cheaper prices because we going to go to and you will be pushing us this far not because we want to do it but because we cannot sacrifice stability for growth.”
Governor Mangudya hiked interest rates to an all-time high of 200% in June to help rein in inflation.Finance minister, Professor Mthuli Ncube, also reinforced Mangudya’s stance saying this inflation rate will remain in place into next year.
“I think once we see that downtrend in month-on-month inflation being sustainable, maybe over a three- to four-month period, then we can begin to think about lowering interest rates,” Ncube said.
“But for now, the tough monetary regime stance and the tough fiscal stance also stand. That’s what it takes to bring stability and bring things under control.”
Dr Mangudya made it public knowledge that his office had hiked interest rates to 200% in June to help rein in inflation and support a local currency that has lost more than 80% of its value against the US dollar this year. The tight monetary stance has resulted in a shortage of Zimbabwe dollars on the parallel market, enabling the convergence of the official and unofficial exchange rates.
On an annual basis, consumer prices surged 280% in September, according to the national statistics agency.Authorities are targeting a monthly inflation rate of 3%, although the desirable target is 1% and may be hard to achieve, said Minister Ncube at a virtual press briefing in Washington. Consumer prices rose 3.5% in September from a month earlier.
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