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Reserve Bank of Zimbabwe (RBZ) has recently appointed a monitory policy committee (MPC) aiming to fight and avoid a recession through a rate hike that has been demanded by many analysts.
In a statement RBZ governor Dr John Mangudya said the committee will be responsible for maintaining the bank’s rate which is at 40 percent.
“…keeping the bank policy rate and the Medium-term Bank Accommodation (MBA) Facility rate at 40% and 30%, respectively.
On Tuesday, the central bank pointed out that it had also kept the medium-term lending rate to productive sectors at 30% and released an additional ZW$2,5 billion (about US$29,6 million) to fund winter wheat farming
“…increasing the amount of the MBA facility by an additional ZW$2,5 billion to cater for the winter wheat planting programme, putting a cap on the interest rate at which banks can on-lend the proceeds from the MBA facility at 10% above the borrowing rate to ensure recovery of the productive sectors,” he added.
The policy rate was recently increased to 40% from 35% in October 2020.
Commenting on the appointment of MPC, experts said government may be forced to cut rates, although it could take longer for the economy to recover.
The RBZ has been careful to increase rates and amplify already subdued demand, stimulate demand and ignite an inflationary spiral.
At 240% this month, the country already has Africa’s highest inflation rate, which central bank Governor Dr. John Mangudya has been careful not to tamper with under a tight disinflationary strategy.
The committee noted the major milestones made by the bank, especially the implementation of a monetary targeting framework, which has been successful in containing reserve money growth, and the introduction of the foreign exchange auction system, which has resulted in the current stability of the exchange rate,” Mangudya said.
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