Finance and Economic Development Minister Mthuli Ncube has said the country will maintain the benchmark interest rate of 200% into next year to achieve economic stability.
Zimbabwe hiked interest rates to 200% in June this year to combat economic headwinds, among them runaway inflation and currency volatility.
The tight monetary stance has inadvertently resulted in a liquidity crunch but has also enabled the convergence of the official and parallel exchange rates. Said Ncube:
I think once we see that downtrend in month-on-month inflation being sustainable, maybe over a three- to four-month period, then we can begin to think about lowering interest rates.
But for now, the tough monetary-regime stance and the tough fiscal stance also stands.
That’s what it takes to bring stability and bring things under control.
Addressing reporters on Saturday at a virtual press briefing in Washington, Ncube said Zimbabwe is targeting a monthly inflation rate of 3% although the desirable target is 1% and may be hard to achieve.
Ncube also said the government now had to “sacrifice” growth that he had earlier forecast at 4.6% for this year, compared with a 5.5% forecast in November.
Meanwhile, the International Monetary Fund revised Zimbabwe’s growth outlook to 3% this week from 3.5%. | Bloomberg