Zimbabwe will keep the world’s highest benchmark interest rate of 200% into next year as it prioritizes economic stability ahead of high growth rates, Finance Minister Mthuli Ncube said.
“I think once we see that downtrend in month-on-month inflation being sustainable, maybe over a three- to four-month period, then we can begin to think about lowering interest rates,” Ncube said.
“But for now, the tough monetary-regime stance and the tough fiscal stance also stands. That’s what it takes to bring stability and bring things under control.”
The southern African nation hiked interest rates to 200% in June to help rein in inflation and support a local currency that has lost more than 80% of its value against the US dollar this year.
The tight monetary stance has resulted in a shortage of Zimbabwe dollars on the parallel market, enabling convergence of the official and unofficial exchange rates.
On an annual basis, consumer prices surged 280% in September, according to the national statistics agency.
Authorities are targeting a monthly inflation rate of 3% although the desirable target is 1% and may be hard to achieve, Ncube told reporters Saturday at a virtual press briefing in Washington. Consumer prices rose 3.5% in September from a month earlier.
Ncube said authorities now had to “sacrifice” growth that he had earlier forecast at 4.6% for this year, compared with a 5.5% forecast in November. The International Monetary Fund cut Zimbabwe’s growth outlook to 3% this week from 3.5%.
A Zimbabwean dollar trades at Z$628 per US dollar, according to the central bank’s website.