Zimbabwe’s apex bank, the Reserve Bank of Zimbabwe is set to introduce a bank rate (or repo rate) that will guide the interest rates in the financial services sector.

A bank rate is the rate of interest which a central bank charges on its loans and advances to a commercial bank.

A higher bank rate will translate to higher lending rates by the banks. In order to curb liquidity, the central bank can resort to raising the bank rate and vice versa.

“Once we establish the accommodation window, we shall come up with something called the bank rate. The bank rate will then determine the rates in the market; that’s how things are going to operate,” said RBZ governor Dr John Mangudya.

The development comes as financial service firms have raised consternation over the set interest rate of 12 percent had been overridden by inflation.

Zimbabwe’s annual rate of inflation rose to 56, 9 percent last month from 42 percent in December 2018.
Previously, the RBZ did not have an official repo rate.

The 2017 Monetary Policy introduced a ceiling of 12 percent per annum on lending rates.

Prior to that (in 2015) the central bank agreed with banks to cap interest rates at 18 percent, as banks were charging interest rates as high as 35 percent per annum, excluding default rates of equal or higher threshold.

Official figures show that the interest rate in Zimbabwe averaged 12,19 percent from 2011 until 2018, reaching an all-time high of 16,04 percent in March of 2012 and a record low of 8,86 percent in September of 2017.