Business Reporter
Zimbabwe’s Central Bank has retained Africa’s highest interest rate of 35%, affirming its tight monetary policy stance will continue into 2025.
Governor John Mushayavanhu stated that the decision aims to keep inflation expectations “well anchored”.
The Reserve Bank of Zimbabwe’s hawkish stance has supported the nation’s bullion-backed currency, the ZiG (Zimbabwe Gold), which strengthened 12.7% against the US dollar in November. This recovery follows a shock devaluation in September that wiped out 43% of the currency’s value.
The devaluation led to a slump in government revenue, slashed workers’ earnings, and sparked double-digit monthly inflation. Inflation has averaged almost 8% in the past seven months, peaking at 37.2% in October.
Mushayavanhu attributed the October inflation spike to the “once-off depreciation of ZiG against the US dollar”.
The ZiG, launched in April, is Zimbabwe’s sixth attempt at a functional local currency in the past 15 years, backed by gold, other precious metals, and foreign currency reserves.
Finance Minister Mthuli Ncube predicts monthly inflation will average less than 3% next year.
However, Oxford Economics considers this forecast overly optimistic, citing Zimbabwe’s limited foreign exchange reserves, lack of access to external markets, and reliance on central bank financing.
“Zimbabwe’s limited foreign exchange reserves, lack of access to external markets, and its tendency to rely on central bank financing to fund fiscal gaps will likely continue to place pressure on inflation and the currency in the medium term,” said Lyle Begbie, an economist with Oxford Economics.
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