THE Reserve Bank of Zimbabwe (RBZ) has defended new interest rates pegged at 50% per annum saying they are meant to cushion local banks against inflationary pressures.
Central bank chief Dr. John Mangudya said the new rates, which came into effect last week, had also been necessitated by speculative hoarding by certain corporates.
“We increased interest rates to 50% to deal with speculation after we had noticed that some companies were now borrowing in domestic RTGS$ to make US$ and put it in their FCA (foreign currency accounts) and start all over again. So we said let us close that gap and that is why we had a sharp increase in interest rates,” Mangudya told the Parliamentary Portfolio Committee on Budget and Finance.
This comes as the country’s inflation rate rose to nearly 100 percent year-on-year as at May 2019 and 12,5 percent month-on-month, according to Zimstat.
Market watchers have said the new interest rates are prohibitive to individual borrowers whose earnings are depreciating with volatile exchange rates.