Sikhulekelani Moyo, Business Reporter
THE Reserve Bank of Zimbabwe (RBZ) has increased interest rate for loans to 200 percent per annum from 80 percent citing the need to align these with prevailing inflationary developments among other latest measures meant to tame exchange rate distortions and price volatility.
These include liquidation of unutilised retained export receipts and plans to introduce gold coins as an investment instrument to assist businesses and individuals to enhance store of value.
RBZ Governor, Dr John Mangudya announced the new measures in a statement yesterday following the recent Monetary Policy Committee (MPC) meeting.
He said the committee deliberated on macro-economic and financial developments in the economy and assessed the progress made in the implementation of measures announced by President Mnangagwa in May.
The committee said the measures had begun to bear fruit as evidenced by the convergence of the auction and the willing-buyer willing-seller foreign exchange rates. It, however, expressed great concern on the recent rise in inflation, which increased to 30,7 percent on a month-on-month basis for June 2022 thereby increasing the year-on-year inflation for June 2022 to 191,6 percent.
“The committee noted that the increase in inflation was undermining consumer demand and confidence and that, if not controlled, it would reverse the significant economic gains achieved over the past two years,” said Dr Mangudya.
In that regard, the MPC resolved to put in place measures to align the interest rates with the inflation developments, enhance circulation of foreign exchange and introduce an investment instrument to assist holders to store value in gold coins.
Regarding interest rates and statutory reserves, Dr Mangudya said the MPC reviewed interest rates and statutory reserves with effect from July 1, 2022 as follows;
“Increasing the bank policy rate from 80 percent to 200 percent per annum, increasing the Medium Term Accommodation interest rate from 50 percent to 100 percent per annum, increasing the minimum deposit rate for ZW$ savings from the current 12,5 percent to 40 percent per annum and increasing the minimum rate for ZW$ time deposits from 25 percent to 80 percent per annum”.
The measures also include maintaining the statutory reserve requirements at the current levels of 10 percent for demand and call deposits and 2,5 percent for savings and time deposits.
In order to enhance the circulation of foreign currency in the economy as well as support the willing-buyer willing-seller foreign exchange market, Dr Mangudya said the MPC resolved to maintain the current export retention thresholds across the various sectors of the economy and that 25 percent of the unutilised export receipts shall be liquidated at the willing-buyer willing-seller exchange rate after 120 days from the date of receipt of the export proceeds.
On use of gold coins as a store of value, he explained that the MPC resolved to introduce these into the market as an instrument that will enable investors to store value and hedge their investments against inflationary pressures.
“The gold coins will be minted by Fidelity Gold Refineries (Private) Limited and will be sold to the public through normal banking channels,” said Dr Mangudya.
Having noted the widespread use of forward pricing in foreign exchange by some economic agents, the Governor said the MPC resolved that mechanisms to formalise forward pricing arrangements should be created through the development of a market for forward exchange rates.
“The appropriate measures in this regard will be announced in due course,” said Dr Mangudya.