Zimbabwe lifts main lending rate to 800%
Zimbabwe’s central bank on Monday raised its main lending rate to 800% from 650% to tame “angry and formidable” inflation, Reserve Bank of Zimbabwe Governor Gideon Gono said.
The central bank also will launch a new currency soon to try to curtail a thriving foreign-exchange black market, he announced in a bi-annual monetary policy speech that came amid deepening economic crisis.
“The threat of continued inflationary pressures remains high ... In order to repel speculative tendencies, the overnight accommodation rate has been increased, with immediate effect,” he said in the televised speech.
The central bank raised the main lending rate to 650% from 500 % in April this year as part of a series of measures to curb the world’s highest inflation rate.
Official annualised inflation measured about 6 600% in August, highlighting an economic meltdown also characterised by a shrinking economy and chronic shortages of fuel and foreign currency.
Gono said inflation should decelerate in the medium term but could come under more pressure from spending ahead of the country’s joint parliamentary and presidential elections in 2008.
“I never dreamt that we would get to these levels of inflation but I am not deterred ... the outlook in the short term is that our number one enemy remains very angry and formidable,” he said.
“In the medium term, however, we will see a steep deceleration of the pace at which the enemy will be charging towards us on the back of improved production and supplies.”
Gono also urged lawmakers to consult widely before moving ahead with a controversial Bill that would transfer majority control of foreign banks and mining companies to Zimbabweans.
President Robert Mugabe’s government has proposed the new law in a bid to give Zimbabweans more control over the economy, despite fears it could further drive investors from the country.—Reuters