Zimbabwe allows currency to slump over 40 percent, hikes policy rate
Zimbabwe’s central bank allowed the local gold-backed currency to fall over 40 percent against the dollar on Friday and hiked its policy rate, giving in to weeks of sustained pressure on the currency.
The central bank’s website gave the mid-rate for the ZiG currency as 24.3902 to the dollar on Friday versus 13.9987 on Thursday, a 42.6 percent fall, according to Reuters calculations.
The Reserve Bank of Zimbabwe said in a statement that its Monetary Policy Committee (MPC) met on Friday and decided to allow greater exchange rate flexibility.
MPC members increased the bank’s policy rate from 20 percent to 35 percent with immediate effect.
“The MPC is convinced that the above measures will go a long way in addressing the emerging exchange rate risks, anchor the inflation expectations and stabilise prices in the near to short term,” the central bank said.
ZiG, which stands for Zimbabwe Gold, started trading in April. It is the country’s sixth attempt at a stable currency in 15 years.
