Zimbabwe’s Central Bank Increases Interest Rates By 35%
We all know that Zimbabwe has been a financial ruin for a really long time. For those worried about the local economy here in SA it has always been something of a weird comfort that at least one of our neighbouring states had an economy in a worse state than the local one.
‘it has always been something of a weird comfort that at least one of our neighbouring states had an economy in a worse state than the local one’
Zimbabwe has, over time, even struggled to settle on what currency to use domestically. For many years there has been an overlap of Zim Dollars, British Pounds, Botswana Pula, SA Rands and US Dollars in use amng the populous. From February 2019, the purposefully promoted rebirth of the Zim Dollar (now known as the RTGS) has been pushed hard by Government.
Back in 2009 the US Dollar became the official adopted currency of the country and remained so for a decade. However, getting enough of these various other country’s currency into the Zim economy and controlling it has been an ongoing challenge that has turned the local government off trying to maintain its use of the US Dollar and moved them back towards trying to have their own national legal tender.
This month Zimbabwean Finance Minister Ncube announced that only Zimbabwe Dollars can now be used for local transactions. This effectively outlawed the use of the US Dollar which has been the preferred currency of many including civil servants who are on the brink of a nationwide strike. The move was made almost overnight with little to no warning of the change coming into effect so abruptly.
Then in something of a surprise overnight move the Central Bank hiked up interest rates from 15% to 50% also pretty much overnight.
‘The move was made almost overnight with little to no warning of the change coming into effect so abruptly’
This massive hike is seen as a reaction to the currency (RTGS) dropping 60% vs the US Dollar during this month. Local inflation year on year from May 2018 to May 2019 has been recorded as sitting at 75.86% and fuel prices have climbed by a scary 150% since January 2019. Analysts fear that these big moves will now trigger another round of Hyper-Inflation locally perhaps followed by the crash of the new official currency in a sad echo of 2009.