Zimbabwe's central bank has cut its policy rate by 50 percentage points to 150%, it said in a statement on Thursday, driven by a downward trend in inflation since late last year, Reuters reported. Monthly inflation fell to 1.1% in January from 2.4% in December, while yearly inflation dipped to 229.8% from 243.8%. "The moderation in interest rates is important and necessitated by the downward trend in the month-on-month inflation since the last quarter of 2022," said the bank, adding it expects the trend to continue into 2023.
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Zimbabwe
Zimbabwe’s central bank raised interest rates to a record and the government officially reintroduced the US dollar as legal currency to rein in surging inflation and stabilize the nation’s tumbling exchange rate, Bloomberg News reported. The monetary policy committee more than doubled the key rate to 200% from 80%, Governor John Mangudya said in a statement on Monday. That brings the cumulative increase this year to 14,000 basis points -- the most globally. “The monetary policy committee expressed great concern on the recent rise in inflation,” Mangudya said.
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Zimbabwe’s President Emmerson Mnangagwa has imposed capital controls in an attempt to control the currency’s rapid depreciation, Bloomberg News reported. The Zimbabwean dollar has lost half of its value this year making it Africa’s worst performing currency. Banks in the country have been ordered to stop lending with immediate effect “to minimize the creation of broad money that is prone to abuse for purposes of manipulating the exchange rate,” Mnangagwa said in a televised speech.
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Zimbabwe has selected Kuvimba Mining House Ltd., a state-owned company, which has been shrouded in controversy, to revive one of the continent’s largest steel mills, Bloomberg News reported. The miner, which already has vast interests in gold and nickel, has been picked as the “investment partner” to breath new life into the Zimbabwe Iron and Steel Company, which has been shut for 14 years. At its peak, the plant produced nearly 1 million tons of steel a year.
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The International Monetary Fund on Tuesday said that it was precluded from providing financial support to Zimbabwe due to its "unsustainable debt and external arrears," and any lending arrangement would require a clear path to a comprehensive restructuring of the African country's external debt, Reuters reported. The IMF said that its staff completed a virtual mission to Zimbabwe from Oct. 16 to Nov. 16, and noted "significant" efforts by authorities there to stem inflation, contain budget deficits and reserve money growth.
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Zimbabwe will use more than half of the $961 million allocated by the International Monetary Fund in the form of special drawing rights to support its beleaguered currency, Bloomberg News reported. The government abandoned a 1:1 peg between a precursor of the reintroduced Zimbabwe dollar and the greenback in February 2019. The currency now trades at 85.82 to the U.S. dollar and even lower on the black market, a plunge that’s made it difficult for the government to get it accepted locally, and it’s generally not tradable outside the country.
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Justin Bgoni, chief executive of the Zimbabwe Stock Exchange, received an unexpected call from a colleague last month: The government had decided to shut down the world’s best performing stock market, the Wall Street Journal reported. Until the suspension, announced June 26 in a tweet from Zimbabwe’s information ministry, the all-share index on the Harare-based exchange had jumped 677 percent since Jan. 1, even as local economists expect gross domestic product to shrink by more than 10 percent.
Zimbabwe’s troubled national airline has failed to secure outside investment, dealing a blow to government plans to sell state-owned assets and secure much-needed revenue, Bloomberg News reported. The airline, which in Oct. 2018 was placed under administration, a form of bankruptcy protection, received expressions of interest from 10 international investors and had short-listed three bidders.
South African Airways, the national airline that’s entered a form of bankruptcy protection, may only be offered 5 percent of the $60 million that it is owed by neighboring Zimbabwe in funds from ticket sales and hasn’t been able to extract from the country, Bloomberg News reported. The central bank’s Monetary Policy Committee plans to “reject the majority of debts” owed to institutions, a move it hopes will save the southern African nation much needed foreign currency, Eddie Cross, a committee member, said. The country is unable to pay for adequate fuel and wheat imports.
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Zimbabwe’s state-owned electricity distributor, grappling with drought and ageing equipment, said on Thursday it will disconnect mines, farms and other users as it looks to recover $77 million in unpaid bills, Reuters reported. The southern African nation is experiencing daily power cuts lasting up to 18 hours after a severe drought reduced water levels at the country’s biggest hydro plant. The Zimbabwe Electricity Transmission and Distribution Company (ZETDC) is also being hampered by ageing coal-fired electricity generators which constantly break down.