The RBZ maintains an interest rate of 35% to manage inflation amid the depreciation of its new currency, Zimbabwe Gold (ZiG), which has lost over 43% of its value since April 2024. Currently, only 30% of citizens use ZiG, while inflation rates continue to rise, exacerbating economic challenges.

The Reserve Bank of Zimbabwe (RBZ) has kept its Monetary Policy Rate (MPR) at 35% to combat inflation, despite the ongoing depreciation of its new currency, the Zimbabwe Gold (ZiG). Since its introduction in April 2024, ZiG has lost over 43% of its value, particularly after a devaluation in September, but the central bank is determined to bolster its currency and manage inflation rates.

ZiG struggled to gain traction, with only 30% of the population utilizing it in transactions, as many still prefer the U.S. dollar. As of Thursday, ZiG was trading at 24.6 per dollar, and inflation rates have surged, reflecting rising costs in food and housing. Month-on-month inflation rates were reported at 10.5% in ZiG and 14.6% in dollar terms in January.

Zimbabwe has been facing ongoing economic challenges, highlighted by the launch of its sixth currency, ZiG, as an attempt to stabilize its monetary system. The RBZ has implemented strict measures, maintaining high-interest rates to control inflation. The fluctuating value of ZiG and the economic reliance on the U.S. dollar further complicate the RBZ’s efforts to establish a functional and adopted currency within the nation.

In summary, the RBZ’s decision to maintain a 35% interest rate reflects its commitment to manage inflation and stabilize the monetary system. Although ZiG has struggled in gaining widespread acceptance, the central bank’s initiatives, like the Targeted Finance Facility, seek to support economic growth. The rising inflation and ongoing reliance on the U.S. dollar indicate persistent challenges in achieving currency stability.

Original Source: techpoint.africa