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In a move reflecting caution amid turbulent global dynamics, Zimbabwe’s central bank has kept its key interest rate unchanged at 35%. The decision, announced following a surprise meeting of the Monetary Policy Committee (MPC), comes as the country navigates international instability while seeking to preserve domestic economic gains.
Central Bank Governor John Mushayavanhu cited rising geopolitical and economic tensions as key factors behind the decision to maintain a tight monetary stance.
“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 on Monday. “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 meeting came ahead of the originally scheduled June 27 rate-setting session, underlining the urgency with which the bank views global and domestic developments. Despite the cautious tone, Zimbabwe’s central bank remains optimistic about the country’s economic prospects, projecting a 6% growth rate this year.
This growth, the governor explained, is expected to be driven largely by a strong agricultural season, with bumper harvests of maize, tobacco, and cotton offering a timely boost.
“Other sectors are also expected to record positive growth performance, benefiting from the prevailing price and exchange rate stability,” Mushayavanhu added.
The central bank has held interest rates steady since a hike last September, which came in response to the devaluation of the gold-backed Zimbabwe Gold (ZiG) currency. While some businesses have raised concerns about the effects of high rates on liquidity and borrowing costs, the bank remains firm in its approach.
Authorities credit the current policy stance with stabilising the ZiG, which has seen a notable increase in usage. According to the governor, the currency is now used in 43% of economic transactions, up from 26% in April.
Foreign currency reserves backing the ZiG stood at $701 million as of last Friday, offering a buffer that the central bank says is vital for maintaining confidence in the fledgling currency. The ZiG, introduced earlier this year, marks Zimbabwe’s sixth attempt at establishing a viable local currency since the collapse of the Zimbabwean dollar in 2009.
In a show of support for the country’s monetary reforms, the International Monetary Fund last week voiced approval for the ZiG to become the sole legal tender, signalling growing international confidence in Zimbabwe’s monetary direction.
As uncertainty continues to cloud the global economic outlook, Zimbabwe is holding the line—betting that monetary discipline and domestic resilience will sustain its recovery.
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