HARARE (FinX) – The Reserve Bank of Zimbabwe lowered its key policy rate for the second time since the Covid-19 outbreak and the third time since the set-up of the Monetary Policy Committee, to provide monetary stimulus as the coronavirus will have a negative impact on the country’s economy.
According to the latest MPC deliberations, the central bank will, effective May 1, 2020, cut its refinancing rate by 10 percentage points to 15% from 25% and said that it expects banks will do the same to provide affordable financial facilities to customers to provide impetus to the resuscitation of production in the economy.
The interest rate applicable to the Medium-Term Bank Accommodation facility will be reduced to 10% also with effect from May 1, 2020. couleur pilule viagra The MBA facility has been increased by $500 million, bringing the total amount to $3 billion while a further $2 billion will be raised from the market through money supply neutral financial instruments.
Banks that access the MBA facility will on-lend at interest rates not exceeding 20%.
The country joins over 25 countries who have made rate changes this month alone including Kenya and Georgia who announced rate cuts earlier today.
Just as the spread of COVID-19 has negatively affected the global economy, Zimbabwe’s economy has also been affected from reduced trade and investment, the limitation of cross-border relations, lower income, higher financial risks in financial institutions, and high inflation along with continued depreciation of the local currency.
The measures highlight the limited space the central bank has to try to stimulate growth -giving respite to companies facing reduced production and demand.
The predominant risk remains that of the current high inflation environment, which the central bank makes no mention of, however and the falling loans to deposit ratio as banks have stayed away from lending. The other downside is that the central bank has to manage would be speculators who might abuse these facilities and put pressure on the ZW$.
