[ACCI-CAVIE] Faced with global inflationary pressures, Zimbabwe has decided to reduce the level of liquidity in its economy. According to the Central Bank, although monthly inflation was down between February and March, it increased on an annual basis. The first information obtained by the experts of the African Centre for Competitive Intelligence obliges to put this file under monitoring 24/7 for the benefit of organizations that trust the Centre.
The Central Bank of Zimbabwe has raised its main policy rate from 60% to 80%. The announcement was made by the institution in a statement issued on 04 April 2022.
This decision is motivated, we learn, by the level of inflation considered “worrying” in the country, in a context of rising world prices of commodities due to the Russian-Ukrainian crisis. Although on a monthly basis, inflation fell from 6.9% to 6.3% between February and March 2022, it increased on an annual basis from 66.11% in March 2021 to 72.70% in March 2022.
Limiting the adverse effects of the war in Ukraine
“In particular, the Committee noted that global inflation was on the rise due to the ongoing conflict between Russia and Ukraine, which had secondary effects on domestic and international prices. Rising prices of oil, gas, fertilizers, and other related products have increased global inflation and inevitably had a negative impact on domestic production costs, destabilizing the foreign exchange market.
Needless to say, Zimbabwe has had to deal with hyperinflation in recent years, which has plunged the economy into a still unresolved crisis. After a decline in GDP between 2019 and 2020, the IMF indicates that economic growth has rebounded to 5.1% in 2021 and is now expected to be 3.1% in 2022. Expectations that could be compromised by the impact of the Russian-Ukrainian crisis on the global economy.
“In this regard, the Committee reiterated the need for the Bank to remain focused on reducing inflation and implement additional policy measures in response to the resurgence of inflationary pressures and parallel currency market activities,” states the Central Bank’s briefing note.
By Moutiou Adjibi