Zimbabwe to Hike Benchmark Rate to 200%, Central Bank Minted Gold Coins to Act as Store of Value – Economics Bitcoin News

After seeing the country’s inflation rise to 191.6% in June, Zimbabwean monetary authorities said they have resolved to increase the benchmark interest rate to 200% per annum. In addition, the central bank said it will introduce gold coins which will act as an instrument that will “enable investors to store value.”

Beware of Speculative Borrowing

Monetary authorities in hyperinflation-stricken Zimbabwe reportedly plan to hike the benchmark interest rate to 200% per annum, one of the highest in the world. According to an official quoted by Bloomberg, this plan is expected to help put the brakes on the country’s runaway inflation. The latest data from Zimbabwe’s statistical body shows the country’s inflation rate now stands at 191.6%.

Explaining the rationale behind the planned move, Persistence Gwanyanya, a member of the Reserve Bank of Zimbabwe (RBZ)’s monetary policy committee, said that by hiking the benchmark rate the central bank will discourage speculative borrowing. Gwanyanya added:

Banks will now be faced with high rates in a period when they were not yet adjusting interest rates.

Prior to this announcement, the RBZ had asked banks to cease lending rates lower than 80% from July 1, 2022.

Gwanyanya is also quoted in the same report conceding that the central bank’s initial year-end inflation target of between 25% and 35% can no longer be achieved. Due to the effect of what he called “external shocks,” the monetary policy committee has now upped its inflation rate forecast to a figure that is above 100%.

As an alternative store of value, gold coins can be used

Meanwhile, in a statement, the RBZ said its monetary policy committee (MPC) had resolved to introduce “gold coins into the market as an instrument that will enable investors to store value.” According to the statement, the gold coins will be produced by the country’s sole buyer of gold and will be “sold to the public through normal banking channels.”

MPC also recommends the minting gold coins. On the other hand, the “minimum deposit rate for ZW$ savings is set to be hiked from 12.5% to 40% while the minimum rate for local currency time deposits is set to jump from 25% to 80%.”

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Terence Zimwara

Terence Zimwara was a Zimbabwe award-winning journalist and author. He is a prolific writer on the economic woes of African countries, as well as digital currencies that can be used to provide an escape path for Africans.