The Reserve Bank of Zimbabwe (RBZ) has projected a slower economic growth rate of 2% for 2024, down from the government’s initial forecast of 3.5%. Despite a lower inflation outlook and market calls for a rate cut, the central bank has decided to maintain interest rates at 20%.
According to RBZ Governor John Mushayavanhu, the economy has remained “resilient” despite the severe drought caused by El Niño. While the government initially forecast a 3.5% growth, Finance Minister Mthuli Ncube hinted at a possible revision due to the drought’s severe impact. The African Development Bank also adjusted its growth forecast for Zimbabwe to 2%, citing the drought, weak commodity prices, and debt.
READ ALSO:
Defense Chiefs Propose Regional Standby Force to Tackle West Africa’s Security Challenges
IMF to Scrutinize Zimbabwe’s New ZiG Currency in Economic Health Check
The RBZ had previously slashed the interest rate from 130% to 20% with the introduction of the new ZiG currency. However, businesses have complained that the rate is still too high and favors the use of the US dollar over the local currency. Mushayavanhu emphasized the need for a tight monetary policy to sustain current stability.
The bank will maintain the main policy rate at 20% per annum, with an interest rate corridor of 11% to 25%. According to Mushayavanhu, stabilization measures since April 2024 have led to a month-on-month ZiG inflation rate of -2.4% in May 2024. Inflation is expected to hover around 0% in June 2024, with year-end inflation projected to remain below 5% due to a stable exchange rate.
The RBZ will also keep money supply growth at 5% to ensure reserve money growth aligns with improved economic activity and increased reserves backing the domestic currency. Despite the challenges, the central bank remains optimistic about Zimbabwe’s economic prospects.
1 Comment
Pingback: BudgIT Condemns Nigerian Government's Plan to Implement Four National Budgets Concurrently - Mbamali