RBZ cuts interest rates as inflation drops

Zim Now Writer

The Reserve Bank of Zimbabwe has cut the bank policy rate from 200 percent to 150 percent as it responded to a drop in inflation, giving relief to companies that were struggling to borrow in local currency.

RBZ Governor John Mangudya,iIn his Monetary Policy Review statement yesterday said the monetary policy remains restrictive to sustain the current stability with interest rates aligned to inflation developments.

This, he said, is meant to sustain and strengthen economic resilience.

“Bank policy rate reduced from 200 percent to 150 percent per annum, to align with the inflation outlook,” he said.

The central bank also announced that the lending rate on the Medium-term Bank Accommodation Facility for the productive sectors, including individuals and MSMEs was reduced to 75 percent from 100 percent per annum.

The bank policy rate was increased to 200 percent from 80 percent last year as part of tight monetary policy measures to contain runaway inflation. Speculative borrowing from banks to finance parallel market activities was rife, resulting in the continued plummeting of the Zimbabwe dollar against major currencies, including the United States dollar.

The Monetary Policy Committee meeting held in December last year promised to review the interest rates in the first quarter of 2023 in line with inflation developments.

Annual inflation has been on a decline in the past five months to 229.8 percent in January from a high of 285 percent in August. Annual inflation is projected to progressively decline and end 2023 in a range of 10-30 percent, Mangudya said.

As part of measures to liberalise the foreign exchange market and reducing the demand of foreign currency on the auction system and the interbank market, foreign currency retention on domestic sales in foreign currency has been increased to 85 percent with effect from February 1.