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Explainer Of RBZ's Recent Move To Raise Interest Rates

Explainer Of RBZ's Recent Move To Raise Interest Rates

The Reserve Bank of Zimbabwe (RBZ) has raised interest rates by 20 percentage points, up from 60% to 80% as it battles the growing threat of inflation.

The Monetary Policy Committee (MPC) of the RBZ which met on 1 April 2022, says the move is necessary due to rising inflationary pressure and the recent movement in the parallel forex market.

With inflation at 72.7% and the main bank rate at 60%, interest rates were negative. This meant that a person could borrow money from the bank for ‘speculative’ purposes, such as buying foreign currency.

With higher interest rates, RBZ hopes to make it less attractive for people to do so. It is now more expensive to get a bank loan.

RBZ last raised rates at the MPC’s last meeting on October 28, increasing them by a similar 20 percentage points.

Imported inflation

Apart from the effects of RBZ’s own failures to stabilize the exchange rate and tame the money supply, Zimbabwe now faces increased threats from abroad.

Prices of goods are rising around the world, and it means there is demand locally for more US dollars to import them.

In December, before the Russian-Ukraine war, Zimbabwe imported goods worth US$771 million in the month. Prices of most major imports – fuel, fertilizer, cooking oil raw materials and others – have risen sharply since then. Importers now need far more US dollars than they needed in December to bring in goods.

At RBZ’s weekly currency auction, where the Zimdollar has fallen by 31% since January, companies are getting less forex due to stricter monitoring. More companies are now turning to the black market to buy forex, increasing demand for US dollars and weakening the local currency more.

Inflation targets

RBZ is also lowering its quarterly reserve money growth target from 7.5% to 5%. This means that the central bank will now release local currency onto the market at a slower speed than before.

Government is already off its inflation targets. It failed to bring monthly inflation to below its target of 4% in the first quarter. Inflation closed the period at 6.3%. The trend also means the year-end target of 35% is now out of reach.

However, Finance Minister Mthuli Ncube has insisted he is sticking to his 2022 GDP growth targets of 5.5% and his inflation projections.

A recent Old Mutual report forecasts inflation at above 105% by year-end.

Market rates for amounts under US$1 000

RBZ also announced that MPC had authorised the following:

Further liberalising the foreign exchange market by allowing banks to conduct foreign exchange transactions of up US$1 000 under an arrangement agreed upon between banks and the Bank and in terms of which individuals with free funds and entities/corporates holding foreign exchange in their foreign currency accounts (after meeting the statutory surrender requirements) shall be free to sell foreign currency to banks on a willing-buyer willing-seller basis.

This means that you can now sell foreign currency of less than US$1000 through the bank at open market rates, and not at the RBZ auction rate. It is a tacit but telling nod by the central bank to the widening gap between its official rate and the market rate.

More: newZWire


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16 Comments

Internet.. 1 month ago

Ini zvangu ndiri kutovhiringika: mari yenyika painenge yodonha inogamwa nemaoko here kuita seinodonha kubva mutswanda 🤭


Gogodera 1 month ago

$us=300 300=1us


JC Form IV 1 month ago

According to our erstwhile Supreme Leader, Commander-in-Thief, Chancellor of All State Universities, First Secretary of ZANU, First Husband and First Cheerleader of Looters International the RTGS/ZWL/ZW$L/Bond Note IS THE STRONGEST REGIONAL CURRENCY.

Ginyanomics

Jah🇿🇼Tsvarie-07 1 month ago

I repeat, Mthuli and Mangudya please swallow your pride and tell the President that you tried but its not happening.
Lets go back to US$ before the Nation collapse, already some companies in Bulawayo's industry are proposing working 3 days per week to their employees because they dont have money to purchase raw material. that alone will make people hate the government even more, people in rural areas rely on those at work in the city. basop basop...


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Gogodera 1 month ago

Zim $us300pa 20 000 rtgs tonga mari


McKenzie 1 month ago

Just phase the bond note, RTGS and zim dollars out.

All the stresses about inflation will be also phased out

Unless if you still want to use zim dollars as a weapon to steal the zimbabweans money or use it as a weapon to steal workers salaries

But still you are getting a lot on all the registered workers whom you are taking their 20% from their salaries without stating why you are deducting the money
Your secret is between the employer and your self on stealing the people's finances. But it's not good. Even if it is PAYE., it's not fair because you doesn't have a percentage really. You only deduct 20 us dollars from any working people on which you are taking almost more than 60 million US DOLLARS per month from the poorest zimbabwean workers
YOUR PROBLEMS ARE SEEN WHEN YOU SAY SOLDIERS, TEACHERS, DOCTORS AND ALL GOVERNMENT WORKERS ARE SERVANTS.

WHO ARE YOUR SERVANTS? YOU MEAN THOSE TOP EDUCATED CHEEPS. YOU ARE GOOD ON TALKING NONSENSICAL SPEECHES ALWAYS

CORRUPTIVE BOSSES THAT ARE HIRED TO LOOT POOR ZIMBABWEANS' FINANCES

WHAT IS A USE OF THE GOVERNOR IN ZIMBABWE BECAUSE YOUR MONEY IS USELESS

WHAT ARE YOU REALLY DOING EXACTLY? THE ANSWER IS STEALING

PLEASE MAY YOU LEAVE THE PEOPLE OF IN PEACE.

CORRUPTIVE PERSONNELS


🍋🍌🍋🍌🍋 1 month ago

.

Jenarari 1 month ago

McKenzie you are a saboteur

You irritaret skirridhi rebhara
Tichakutswanya raiki raisi God bress Pumura, Orodhi Pumura

Mr Tell me 1 month ago

Markets
1, Mbare
2, Rbz
3, Open
4, White
5, Green
6, Black etc
Saka chaiyo apa ndyp ne Quarrel Market yenyika😅😅


JC Form IV 1 month ago

Go to the bank, you get no US$.
Go to 4th street you get Us$.

Where you get the US$ is where you get the real rate, which as you rightly pointed out, the 'Quarrel' rate is the real rate

Mr Tell me 1 month ago

Markets
1, Mbare
2, Rbz
3, Open
4, White
5, Green
6, Black etc
Saka chaiyo apa ndyp ne Quarrel Market yenyika😅😅


Mr Tell me 1 month ago

Markets
1, Mbare
2, Rbz
3, Open
4, White
5, Green
6, Black etc
Saka chaiyo apa ndyp ne Quarrel Market yenyika😅😅


Just dollarise simple 1 month ago

"This means that you can now sell foreign currency of less than US$1000 through the bank at open market rates, and not at the RBZ auction rate"


Jongwe 1 month ago

The real economics that l learnt from school is moving in inverse direction to the situation in Zimbabwe and it is pathetic to see the general population wallowing in abject poverty, l just hope one day these so called Economics gurus will revamp the economy out of the murky waters


Machiavelli 1 month ago

@Smoking on top, in Zimboland it's Ginyanomics

Smokin on top5 1 month ago

Economics dzemuma books were more centered on stable economies
Our Zim economic system haimo mumaBooks


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