By ETimes
The Monetary Policy Committee (MPC) of the Reserve Bank of Zimbabwe (RBZ) has decided to keep interest rates unchanged in order to keep the stability in the economy.
RBZ maintained the rate at 200 percent to keep the stability in the economy, but the governor hinted on a review in the first quarter of 2023.
The MPC statement read, “The committee reviewed to maintain the Bank policy rate and medium-term lending rate at current levels of 200 percent and 100 percent, respectively, and to review the interest rates in the first quarter of 2023 as dictated by inflation developments.”
The rate was hiked to 200 percent at the end of June, from 80 percent as part of measures to fight inflation and stabilise the country’s currency.
The move, combined with a local currency mop up operation being executed through trade in gold coins, has been credited for cooling off a relentless market rage which hit the economy during the first half of the year.
Zimbabwe’s largest business member organisation, the Confederation of Zimbabwe Industries (CZI), said the prevailing high interest rates were choking business activity.
“A lot of those who were in borrowed positions are finding it difficult to service the loans. However, with more dollarisation of the economy, some are negotiating with banks for conversion of those loans into USD (loans),” said CZI president Kurai Matsheza.
Dr Mangudya, defending the interest rate position as necessary to maintain a lid on inflation and the obtaining exchange rate stability, dismissed suggestions that high-interest rates on bank loans would spur NPLs.
He argued that fewer corporates were still willing to accrue Zimbabwe dollar debt, exactly the desired objective of the decision to hike the bank policy rate, which determines minimum lending rates charged by commercial banks.
The MPC also said it will review the foreign currency retention ratios in the first quarter of 2023.
Dr Mangudya said, “Against that background, the committee unanimously agreed to stay the course of a tight monetary policy until the first quarter of next year and resolved to review the foreign currency retention thresholds on exports and domestic FCAs during the first quarter of 2023 in line with improved efficiency of the foreign exchange trading systems in order to sustain the current growth trajectory in foreign currency receipts.”
The Medium- Term Lending Facility was kept at $10 billion for the rest of the year but will be doubled to $20 billion in the first quarter of 2023, as the Bank continues to support the productive sectors of the economy.
This is a facility under which micro, small and medium enterprises, individuals and the productive sectors of the economy can borrow, and now they can borrow at interest rates applicable from time to time – Harare
