Central Bank set to increase interest rates to discourage speculative borrowing

By Davison Vandira

THE Reserve Bank of Zimbabwe has stepped up the fight against currency instability through increasing interest rates in line with inflation to discourage speculative borrowing and improve business confidence in the country.

This Thursday Zimbabwe’s business sector under the banner Zimbabwe Institute of Strategic Thinking (ZIST) met Reserve Bank of Zimbabwe (RBZ) officials to find a lasting solution to the currency volatility, with a broad objective of closing policy gaps and improve monetary confidence in the economy.

The business fraternity noted the need for monetary policy consistency to cultivate confidence in the economy.

As business ,our sincerity has been questioned because of the volatility of the currency situation as such we are appealing with you Governor, to brainstorm here and come up with effective solutions that arrest the prevailing depreciation of the local currency which is not friendly to anyone, as such we are available as business to support efforts by government,” said Mr Tapiwa Karoro; Business Representative.

RBZ Governor Dr John Mangudya highlighted that the current monetary challenges are based on behavioural issues as the fundamentals that affect the exchange rate are sound.

He also revealed that the central bank will be mopping up excess liquidity in the market as it intensifies the fight against currency volatility.

As monetary authorities, our decisions are informed by figures and I can factually state that all the fundamentals are in place and the only challenge is dealing with expectations largely informed by past experiences, not by anything else. As such, going forward we will implement measures to tighten liquidity of the local currency which has been one way or another,” he said.

Zimbabwe’s economic targets require a resilient macroeconomic climate anchored on currency stability.

The Reserve Bank of Zimbabwe is currently operating a tight monetary stance in support of the 2022 National Budget and authorities have been implementing measures to strengthen the Zimbabwean Dollar’s appeal as the currency of reference.

The general consensus among economists is that currency stability is a confidence booster which is key in the collective journey towards an upper middle income society by 2030.