Zimbabwe, wary of a rise in global tensions, resolved to leave its bank policy rate unchanged at 35%, according to John Mushayavanhu, the central bank governor.
“The MPC noted the broad-based deceleration of global growth occasioned by escalating trade tensions, geo-economic fragmentation, regional and international conflicts and policy uncertainty,” Mushayavanhu said in a statement Monday after a surprise meeting of the Monetary Policy Committee. “Considering the challenging and rapidly evolving risks to the global growth outlook, the MPC advised the Reserve Bank to maintain a sufficiently tight monetary policy stance.”
The central bank was set to hold a rate setting meeting only later this month on June 27, according to a schedule available on its website. Despite, the current uncertain global environment, the bank said it still sees 6% growth in the domestic economy as achievable this year. The strong performance of agriculture is expected to help spur the expansion after improved output from key crops including corn, tobacco and cotton.
“Other sectors are also expected to record positive growth performance, benefiting from the prevailing price and exchange rate stability,” Mushayavanhu added.
The southern African nation has kept rates unchanged since it lifted them last September in response to a sharp devaluation of its gold-backed currency, the ZiG. Businesses have repeatedly asked the central bank to reconsider its tight monetary policy stance, which is causing a severe liquidity crunch in the economy.
The bank maintains that its policy has helped stabilize the ZiG, short for Zimbabwe Gold, and is seeing increased usage in the economy. It is now used in 43% of transactions in the economy up from 26% last April, according to the governor. The foreign currency reserves backing the ZiG stood at $701 million as of last Friday.
The International Monetary Fund last week also voiced support for the ZiG to become the sole currency in the economy. The ZiG is the nation’s sixth attempt at establishing a functioning local currency since 2009.
