Zimbabwe Maintains Africa’s Highest Interest Rate to Curb Inflation
TLDR
- Zimbabwe’s central bank maintained its benchmark interest rate at 35%.
- It is the highest in Africa, reaffirming a tight monetary policy stance for 2025.
- The decision aims to anchor inflation expectations and stabilize the Zimbabwe Gold (ZiG) currency.
Zimbabwe’s central bank maintained its benchmark interest rate at 35%, the highest in Africa, reaffirming a tight monetary policy stance for 2025.
The decision aims to anchor inflation expectations and stabilize the Zimbabwe Gold (ZiG) currency, according to Governor John Mushayavanhu.
The ZiG, a bullion-backed currency launched in April, strengthened 12.7% against the US dollar in November, recovering from a 43% devaluation in September. However, the devaluation caused a slump in government revenue, eroded earnings, and pushed monthly inflation to 37.2% in October, the highest since the currency’s debut.
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Key Takeaways
Zimbabwe’s hawkish monetary policy has bolstered the ZiG but faces challenges. Inflation, fueled by limited foreign reserves and reliance on central bank financing, threatens economic stability. While fiscal authorities predict lower inflation in 2025, analysts remain skeptical, citing structural vulnerabilities. The central bank’s stance reflects efforts to manage risks while navigating a volatile economic environment.
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