Mthuli Ncube Threatens Fresh Interest Rate Hike

Finance and Economic Development Minister Mthuli Ncube has threatened to hike Zimbabwe’s policy rate beyond 200% if companies continue engaging in parallel market activities.

Ncube was speaking during the Zimbabwe International Trade Fair (ZITF) business conference in Bulawayo this week. He said:

We have responded to inflation domestically by raising interest rates.

The interest rates have been quite high. Of late, we have started bringing down the interest rate.

But I’m now wondering about the recent hike in the exchange rates in other (black) markets. Should I increase the interest rates?

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Please stop pushing that parallel market (rate), because what we will do is increase the interest rates to 200% and beyond.

Because that is what we know; so desist from operating in that market and pushing up the parallel rate. It is because this is very costly to everyone.

Last year, the Reserve Bank of Zimbabwe (RBZ) hiked the policy rate to 200%.

It was later reduced to 150%, and further to the current 140% but this is still considered punitive by firms.

The policy rate (benchmark or key interest rate) is the interest rate at which a central bank lends money to commercial banks in its country.

The policy rate is set by the central bank’s monetary policy committee and is used as a tool to control inflation and stabilise the economy.

Hiking the policy rate makes borrowing becomes more expensive for commercial banks and this can lead to a decrease in lending and economic activity, which can help to control inflation by reducing demand for goods and services.

More: Pindula News