By ETimes
Consistent with the current and expected inflation outturn, the Governor said, with effect from February 1, 2023, the bank policy rate will drop from 200 percent per annum to 150 percent per annum.
Dr. Mangudya said his bank will also be reducing the lending rate on the Medium-term Bank Accommodation Facility for the productive sectors of the economy (including individuals and MSMEs) from 100 percent per annum to 75 percent per annum.
However, the RBZ said it will be maintaining the prevailing bank policy rates as the minimum lending rates for all banks.
In July 2022 the Reserve Bank of Zimbabwe (RBZ) increased the bank policy rate to 200 percent from 80 percent accompanied by the introduction of gold coins as part of measures to curb the bloating inflationary challenges.
This was not an isolated case to Zimbabwe as elevated global and regional inflationary pressures resulted in central banks across the world adopting various and aggressive monetary tightening strategies.
This was after Zimbabwe’s annual inflation in the third quarter closed at 280,4 percent which was a rise from June 2022’s 191, 6 percent.
According to economists, the businesses were now being cushioned by the stock market but it could only last as much, so the country was definitely headed for a recession but maybe in the second quarter of 2023.
Economist Dr Prosper Chitambara said, “It is true that the tight monetary stance was now straining aggregate demand in the economy and had it been sustained it was going to affect economic output growth in the long run. The tight monetary stance was going to exacerbate the already dire growth situation as we know growth is already going to be lower than it was last year.”
Dr Chitambara added that it was a no brainer as our inflation rate was falling, it was an opportune time for us to revise our interest rate policy in line with the falling inflation.
Such a move has pleased industry players as they have been advocating for higher retention ratios for two years now. Confederation of Zimbabwe Industries (CZI) president, Mr Kurai Matsheza said the developments are a welcome relief for their members.
“We have been engaging authorities regarding these issues and we are happy that the governor has listened to us. Yes, we might have wanted more but the increase in retention ratios is a very positive development, together with the reduction of interest rates,” Matsheza said.
On the interest rates, Matsheza said, “The issue is that we should respect fundamentals and we feel as we stand today these are the best or near to best rates we can get. We will continue to engage them if we feel there is a need for a review.” – Harare