Zimbabwe’s central bank, the Reserve Bank of Zimbabwe (RBZ) has increased the interest rate from 15% percent to 35%, a move they said is meant to curb “speculative borrowing.”

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.

“In order to curb speculative borrowing, the Monetary Policy Committee (MPC) resolved to increase the Bank Policy rate from the current 15% to 35%, with effect from 1 July 2020.

“The rate will be reviewed from time to time as dictated by prevailing market fundamentals,” said the RBZ governor Dr John Mangudya today.

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.

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.