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RBZ keeps interest rate at 35pc

18 Feb, 2020 - 00:02 0 Views
RBZ keeps interest rate at 35pc Dr Mangudya

The Herald

The Reserve Bank of Zimbabwe  (RBZ) yesterday left the overnight accommodation rate unchanged at 35  percent, and forecast annual inflation to close the year at around 50  percent.

Presenting a bullish first half monetary policy statement, central bank  governor, Dr John Mangudya said the stability of the rate, which was  reduced from 70 percent last November, would help re-build confidence in  the economy.

“Following Monetary Policy Committee (MPC) deliberations, the bank  reduced its policy range on overnight accommodation from 70 percent to 35 percent, effective November 20, 2019 in order to promote confidence in the economy and minimise non-performing loans,” he said.

“At its meeting held on February 14, 2020 the MPC resolved to maintain  the policy rate at 35 percent per annum.”

The apex bank said it expects the economy to grow by three percent.

Dr Mangudya said month-on-month inflation is targeted to be below five percent by year end in line with the bank’s thrust of stabilising the  economy.

He said Zimbabwe’s inflation had runaway in the last half of last year following currency reforms implemented by Government that saw  the re-introduction of the Zimbabwe dollar as a mono-currency.

“Stabilising the negative shocks of  cost of adjustment that  emanated from the economic reforms the country went through in 2019  in its quest to right-size or re-balance the economy, it is necessary for  rebuilding confidence with the Zimbabwean citizenry and for creating a  conducive economic environment for sustainable growth,” the central bank  governor said.

Following the introduction of a local currency, Government last year  suspended the production of annual inflation statistics, which is now  expected to resume in March.

Dr Mangudya said the bank was keeping liquidity supply in check, with $1,1 billion in notes and coins having been in circulation as at the  end of December 2019, out of the $34,5 billion in bank deposits.

About 200 businesses controlled 50 percent of the bank deposits.

“The bank will continue to gradually increase the notes and coins to the desired optimal proportion of bank notes and coins in circulation of  up to 10 percent of deposits agreed by the MPC to meet cash demand,” he  said.

“Moreover, the bank will gradually introduce notes in larger  denominations to improve efficiency and convenience to the public.”

The cash in circulation at the moment amounts to about 3,2 percent of  total deposits. — New Ziana.

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