THE Reserve Bank of Zimbabwe (RBZ) has left its interest rate policy unchanged in an effort to entrench the prevailing economic stability, positive growth trajectory and sustain the inflation decline.
Governor Dr John Mangudya said the Monetary Policy Committee (MPC), at its last meeting on June 28, noted with satisfaction the current economic stability and the positive growth trend in the economy.
He said the MPC was pleased with the current disinflationary trend, which has seen annual inflation dropping from 161,6 percent in May to 106,6 percent in June.
The central bank has projected the annual inflation rate to fall further to 55 percent this month and plunge below 25 percent by year end.
“The committee noted with satisfaction the current macroeconomic stability and positive growth trajectory that is underway, a position which has also been confirmed by the International Monetary Fund, the World Bank and the African Development Bank,” Dr Mangudya said.
The IMF has projected that Zimbabwe’s economy will grow by six percent this year, slightly slower than Finance and Economic Development Minister Prof Mthuli Ncube’s projection that the economy will expand by 7,3 percent.
On the other hand, the World Bank was more conservative, forecasting that Zimbabwe’s economy will grow by 3,9 percent this year on the back of a strong agricultural season and expected global commodity price boom.
Dr Mangudya said the monetary authorities have thus taken the decision to maintain the bank’s policy rate at 40 percent while the medium term accommodation facility was kept at 30 percent.
The RBZ increased its bank policy or accommodation rate from 35-40 percent in February this year, as part of monetary policy measures designed to consolidate economic stability.
The bank’s policy rate is a major policy instrument against which virtually all commercial banks benchmark their lending rates.
The medium term facility rate relates to the multi-billion productive sector funds the bank announced in August 2020, for disbursement to banks to on-lend to various productive sectors of the economy.
The Governor also said to buttress the prevailing economic conditions, the bank will further cut its quarterly reserve money growth target to 20 percent from 22.5 percent.