Holding interest rates at 200% - the world’s highest – will suppress Zimbabwe’s economic growth, according to analysts.
Finance Minister Mthuli Ncube affirmed Zimbabwe would maintain interest rates at 200% for the coming three months in a bid to stabilise inflation.
“That’s what it takes to bring stability and bring things under control,” he said.
However, analysts have stated that the high-interest rates were stifling economic growth and productivity.
“A 200% interest benchmark is a sure way to guarantee a recession. It stifles business and output,” according to former Finance Minister and opposition parliamentarian, Tendai Biti.
He added that such high-interest rates “will not control inflation” which in the case of Zimbabwe “is primarily a product of government’s overzealous fiscal policy” that had led to broad money growth.
Furthermore, retailers and industrialists are still expecting volatility within the next few months, The Zimbabwe Mail reports, even though they are increasing U.S. Dollar sales. According to Truworths Zimbabwe, the firm’s sales and profitability for the full year to July 2020 had been impacted by a pricing regime that “rendered products expensive in U.S. Dollar terms”.
In addition, the situation has been exacerbated by the country’s elevated indebtedness, preventing it from obtaining further funding for economic and developmental schemes.
Zimbabwe owes international creditors around $10 billion, however, the Finance Minister said the country is engaging the World Bank and IMF to clear the debt, after suffering bouts of hyperinflation over the last 15 years.
As such, the country hasn’t received funding from lenders such as the IMF and World bank for over 20 years.
“We’ve begun to make token payments to the World Bank, the AfDB (African Development Bank), European Investment Bank and the Paris Club creditors, 17 of them, we will be making token payments to show that we want to be a good debtor,” Ncube stated.
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