Zimbabwe’s central bank, the Reserve Bank of Zimbabwe (RBZ) has maintained the interest rate at 35 percent, a level that was set earlier in June.

The monetary authorities say the present interest rate will contribute the sustenance of stability that has already been achieved in the economy since the establishment of the foreign currency auction system.

In developments this year, the interest rate was reduced from 35% to 15% earlier in April after businesses made representations to the apex bank to reduce the bank rate to circa 20% following the advent of the coronavirus (Covid-19) pandemic.

But a rise in speculative borrowing has forced the central bank to backtrack on the earlier policy shift, increasing the rate to 35% in June.

“The MPC (Monetary Policy Committee) resolved to put the following measures to buttress price and financial system stability in order to foster the country’s economic recovery process: Maintaining a status quo on both the policy rate for overnight accommodation at 35% and the medium-term lending rate for the productive-sector lending at 25%,” said RBZ governor Dr Mangudya this afternoon.

“This decision on interest rates takes into account of the current tight liquidity conditions in the market and the need to continue controlling speculative borrowing.”

The RBZ has been constantly tinkering with the interest rates to deal with varying prevailing economic situations.

Last June Zimbabwe’s monetary authorities hiked the overnight accommodation rate from 15% to 50% and then to 70% in September in a move to discourage speculative borrowing and protect the value of the Zimbabwe dollar following its floating on the interbank market for the first time since 2009.

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Then in November the central bank reduced the bank rate from 70% to 35% as part of its efforts to promote lending to productive sectors, before reducing it to 15% due to the Covid-19 pandemic.

Meanwhile, Dr Mangudya has indicated that the apex bank has increased funding to productive sectors of the economy, specifically to the tune of ZWL$2.5 billion under the bank’s medium-term lending facility to support the productive sectors and promote economic recovery.

“The funds will be accessed by final beneficiaries through normal banking channels under an arrangement that is consistent with the conservative monetary targeting framework being pursued by the bank,” he said.

“Accordingly, banks are encouraged to ensure that repayments by their customers from the existing financing facilities are used to augment the bank’s medium-term financing window.”