Central bank governor Gideon Gono also said Zimbabwe's major financial houses - commercial and merchant banks, building societies and discount houses - had met a September 30 deadline giving them nearly a year to raise their capitalisation to $10-million.

"In fine-tuning the monetary policy, with inflation reduction as the over-riding objective of the central bank, it has become necessary that additional resources be implemented for us so as to stabilise the economy in the medium term," Gono said in a statement.

"With immediate effect, the central bank has raised the accommodation rate from 300% to 500% for secured lending and from 350% to 600% for unsecured lending," he added.

The central bank's secured accommodation rate is also known as its bank rate, at which it lends money to commercial banks.

On July 30, Gono slashed the rate by 550 percentage points to 300%, citing a need to balance "the virtues of anti-inflation demand management and the continued flow of credit to the productive sectors of the economy."

But Gono warned a month ago that interest rates were likely to be raised again to tame galloping inflation.

The southern African country is grappling with a deepening recession widely blamed on President Robert Mugabe's government and making itself felt through record inflation, shortages of foreign currency, fuel and food, and grinding poverty.

Its inflation rate of 1 204,06% is the world's highest, while unemployment has vaulted to more than 70 percent as companies either fold or are forced to downsize.

The crisis has been worsened by Zimbabwe's isolation from the international donor community, mainly over policy differences especially Harare's controversial seizure of white-owned commercial farms for redistribution to blacks.

Mugabe, 82 and in power since independence from Britain in 1980, denies responsibility for the country's economic woes, and in turn accuses foreign and local opponents of sabotaging Zimbabwe's wealth over his land reforms.

In his statement on Monday, Gono also said the central bank had cancelled the operating licences of 16 money transfer agencies. The government has accused the agencies of failing to declare all foreign currency transactions and operating on the black market.

"This withdrawal has been necessitated by non-performance and defiant behaviour by most players in this sector, he said. - Reuters