HARARE (Reuters) – Zimbabwe won’t hesitate to raise interest rates above their current level of 50% to deal with speculative borrowers, Finance Minister Mthuli Ncube said on Monday.
Zimbabwe hiked its overnight lending rate to 50% last month after making its interim RTGS currency the country’s sole legal tender.
Central bank Governor John Mangudya said on Monday that Zimbabwean individuals and companies held around $1 billion in foreign-currency accounts, around three months’ import cover.
Meanwhile; speaking during the Daily News Business Breakfast Forum, “Implications Of The New Currency” on Monday morning, Reserve Bank of Zimbabwe (RBZ) governor John Mangudya outlined the implications of the introduction of local currency. He said:
- Stability on the interbank foreign exchange market as more foreign currency is sold through formal channels. As at end of June 2019 US$664 million had been traded.
- Reduction of trading of foreign currency on the parallel market.
- Stronger demand for local currency, which strengthens its value.
- Halting of costly re-dollarisation – economic agents were reverting to use of US dollar as the unit of account and medium of exchange;
- Improved monetary policy effectiveness – use of monetary policy in instruments to control inflation and maintain price stability going forward;
- Retention of foreign exchange accounts (current Nostro deposit position around US$ billion or around $3 months import cover) to boost economic activity in the country;
- Restoration of confidence in the economy as measures yield positive results;
- Creation of certainty which assists business in planning and decision making
- Creation of scope for increased production and productivity – low production is the major challenge facing the economy.