HARARE – Zimbabwe lost its unenviable position of having the world’s highest interest rate to Argentina, after slashing borrowing costs to help boost economic growth.
The monetary policy committee cut the benchmark interest rate to 130 percent from 150 percent, which lags Argentina’s 133 percent.
The MPC acted because of“emerging global risks and the need to keep exchange rate and inflation expectations anchored to support economic growth,” Governor John Mangudya said on Tuesday.
“Subdued global growth emanating from geo-economic fragmentation and the effects of tight monetary policy, high interest rates, credit squeeze and low international commodity prices could pose significant risks to the current stability in the domestic economy,” he said.
Unlike Argentina, which raised borrowing costs by 15 percentage points to 133 percent on Oct.12 to curb price growth that’s running at 138 percent, government interventions in Zimbabwe have enabled it to cut rates.
The southern African nation’s local unit plunged about 85 percent against the greenback between May and June, causing inflation to surge to 176 percent in June.
The government then liberalized the exchange rate and introduced measures to promote use of the Zimbabwe dollar, such as requiring corporate taxes to be paid in the currency, which helped stabilize it and restore some price stability.
Annual inflation slowed to 18.4 percent in September from 77 percent a month earlier after the statistics office revised its methodology to take into account the dominant role the US dollar plays in the economy.
- this article first appeared on Bloomberg
