The Reserve Bank of Zimbabwe (RBZ), the country’s central bank, has raised its benchmark interest rate from 80 to 200 percent, citing spiralling inflationary pressures amid rising fuel prices.
John Mangudya, the bank’s governor, announced this in a statement on Monday following the meeting of the bank’s monetary policy committee (MPC).
The hike brings the cumulative increase in rates this year to 14,000 basis points — the world’s highest.
Mangudya said that an aggressive monetary stance was needed to stop the rise in prices and enhance the circulation of foreign exchanges.
He said the new interest rates will come into effect from July 1, 2022.
According to Mangudya, the MPC also decided to increase the medium-term accommodation interest rate from 50 percent to 100 percent, while for Zimbabwean dollar savings, the minimum deposit rate was increased from 12.5 percent to 40 percent per annum.
He said consumer prices rose 30.7 percent on a month-on-month basis in June, bringing the year-on-year inflation rate to 191.6 percent.
“The committee noted that the increase in inflation was undermining consumer demand and confidence and that if not controlled, it would reverse the significant economic gains achieved over the past two years,” Mangudya said.
Meanwhile, the bank also announced the introduction of gold coins into the market as an alternative store of value.
“The MPC resolved to introduce gold coins into the market as an instrument that will enable investors to store value,” he said.
“The gold coins will be minted by Fidelity Gold Refineries (Private) Limited and will be sold to the public through normal banking channels.”
The Zimbabwean government also said it would legalise the use of the US dollar for the next five years to help steady its local currency.
In Nigeria, the central bank recently hiked its interest rate to 13 percent to tame rising inflation.