Zimbabwe will keep world’s highest interest rates into 2023

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By Bloomberg News

Zimbabwe will keep the world’s highest benchmark interest rate of 200% into next year as it prioritises economic stability ahead of high growth rates, Finance Minister Mthuli Ncube said.

“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,” Ncube said. “But for now, the tough monetary regime stance and the tough fiscal stance also stand. That’s what it takes to bring stability and bring things under control.”

The southern African nation hiked interest rates to 200% in June to help rein in inflation and support a local currency that has lost more than 80% of its value against the US dollar this year. The tight monetary stance has resulted in a shortage of Zimbabwe dollars on the parallel market, enabling the convergence of the official and unofficial exchange rates.

On an annual basis, consumer prices surged 280% in September, according to the national statistics agency. Authorities are targeting a monthly inflation rate of 3%, although the desirable target is 1% and may be hard to achieve, Ncube told reporters Saturday at a virtual press briefing in Washington. Consumer prices rose 3.5% in September from a month earlier.

Ncube said authorities now had to “sacrifice” growth that he had earlier forecast at 4.6% for this year, compared with a 5.5% forecast in November. The International Monetary Fund cut Zimbabwe’s growth outlook to 3% this week from 3.5%.

A Zimbabwean dollar trades at Z$628 per US dollar, according to the central bank’s website.