Zimbabwe is today the country that holds the highest interest rates in the world. Indeed, Zimbabwe’s central bank has maintained the highest borrowing rates in the world at its initial rate-setting meeting following the re-election of President Mnangagwa last month.
As of September 29, 2023, Zimbabwe has the world's highest interest rate at 150%. This was decided by the Monetary Policy Committee (MPC) at its most recent meeting on September 28.
The MPC hiked the interest rate in June 2022 from 60% to 80% in an effort to curb soaring inflation and stabilize the Zimbabwean dollar. Inflation in Zimbabwe has been rising steadily in recent months, reaching 285% in August 2023. The Zimbabwean dollar has also been depreciating rapidly against the US dollar.
Zimbabwe has one of the highest inflation rates in the world, currently at 285%. This means that the prices of goods and services are rising rapidly, which erodes the value of money. High-interest rates are one way that the central bank can try to combat inflation.
Moreover, the Zimbabwean dollar has been depreciating rapidly against the US dollar in recent months. This makes it more expensive for Zimbabweans to import goods and services, and it also undermines confidence in the currency. High-interest rates can help to attract foreign investment and stabilize the currency.
The reason why inflation got out of control in Zimbabwe is because the Zimbabwean government has been borrowing heavily to finance its budget deficit. This has put upward pressure on interest rates, as the government competes with businesses and individuals for loans. Thus, the Reserve Bank of Zimbabwe (RBZ) has been pursuing a tight monetary policy in an effort to combat inflation. This has involved raising interest rates and restricting the supply of money. The combination of these factors has led to Zimbabwe having the highest interest rates in the world.
The MPC's decision to maintain the interest rate at 150% is a sign that it is committed to fighting inflation and stabilizing the economy. However, the high-interest rate is also making it difficult for businesses to borrow money and invest. This could have a negative impact on economic growth in the long term.
The plan is to uphold a stringent fiscal and monetary policy framework, with the aim of ensuring economic stability and providing backing to Zimbabwe.
The fact that the Reserve Bank of Zimbabwe has decided to maintain interest rates at 150% is proof that Zimbabwe is not ready to incorporate the BRICS Alliance. Zimbabwe's chronic economic woes represent a massive risk that the BRICS Alliance is not ready to bear. Speaking hypothetically, if Zimbabwe becomes a member of the BRICS Alliance while it continues to incur economic problems, BRICS countries will have to constantly bailout Zimbabwe. This bailout will be a misallocation of resources because the resources used to bailout Zimbabwe, which is not economically a strong nation, could have been used for more efficient use.
Zimbabwe’s economic woes are far from over. And we don’t know if they will ever end. The chronic economic mismanagement that has started under Mugabe, continues to downgrade and degrade Zimbabwe’s standard of living. There is a strong chance that interest rates will be hiked since inflation remains so high.