BUSINESS REPORTER
The Reserve Bank of Zimbabwe (RBZ) has raised the bank policy rate to 80% per annum from 60% to curb speculative borrowing, among a raft of measures to contain inflation and foreign exchange parallel market activities.
The bank will tighten monetary policy by reducing the quarterly reserve money growth target to 5% from 7.5% for the quarter ending June 2022, central bank chief John Mangudya said in a statement.
The measures, announced by Mangudya after a monetary policy committee meeting (MPC) held last week, come after annual inflation surged to 72.70% in March from 66.11% in February.
In a statement, Mangudya said the MPC noted that global inflation was on the increase as a consequence of the on-going Russia-Ukraine conflict which had secondary pass through effects on domestic and international prices.
“Rising prices of oil, gas, fertilisers and other related products had the effect of increasing global inflation and inevitably had a negative impact on domestic costs of production and was destabilising the foreign exchange market,” he said.
The MPC increased the Medium-Term Bank Accommodation Facility interest rate to 50% per annum from 40%.
It also increased the minimum deposit rates for local currency savings and time deposits to 12.5% and 25% respectively from 10% and 20% to promote the use of the Zimbabwe dollar. However, the rates trail inflation which hit 72.70% in March.
RBZ also liberalised 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 central bank. This would allow individuals with free funds and entities/corporates holding foreign exchange in their foreign currency accounts (after meeting the statutory surrender requirements) to sell foreign currency to banks on a willing-buyer willing-seller basis, Mangudya said.
