Zimbabwe's central bank hikes interest rates amid resurging inflation

HARARE, June 6 (Xinhua) --

The Reserve Bank of Zimbabwe (RBZ), the country's central bank, has raised its policy interest rate from 140 percent to 150 percent per annum in an effort to tame inflation, bank governor John Mangudya said Tuesday.

The bank also increased the medium-term bank accommodation interest rate from 70 percent to 75 percent per annum.

Mangudya said the RBZ shall sell foreign currency at the market-determined exchange rate through banks, in an effort to ensure the inter-bank foreign currency market is the primary source of foreign currency in the economy.

All these measures take effect on Wednesday.

 "Thus in order to ensure that the interbank forex market is self-financing, the 90-day liquidation requirement on export proceeds will fall away," Mangudya said in a statement issued after a meeting of the RBZ Monetary Policy Committee.

He said the main foreign exchange auction system shall be merged with the one catering for small and medium enterprises under the 5 million U.S. dollars per week policy to meet smaller requirements for foreign payments and continuous price discovery.

The two auction systems were introduced by the RBZ in 2020 to help foster price and exchange rate stability.

Last week, Finance Minister Mthuli Ncube capped foreign currency allotments from the auction system to 5 million U.S. dollars per week from around 50 million dollars in 2021, among a host of measures to stabilize the local currency.

Mangudya said the latest measures are meant to complement recent fiscal measures taken by the finance minister to address the current volatility in the exchange rate and prices of goods and services.

"The bank remains committed to continuing with the current tight monetary policy to restore and sustain the exchange rate and inflation stability," Mangudya said.

Zimbabwe is faced with the threat of resurging inflation amid exchange rate instability, with month-on-month inflation soaring to 15.7 percent in May, gaining 13.3 percentage points on the April rate of 2.4 percent.