ZIM’S MERRY-GO-ROUND FINANCE MEASURES FAIL TO CHEER UP ECONOMY

HARARE - New gold coins, an interest rate at 200 percent - among the highest in the world – and jotting down the legal currency status for US dollars into law are all part of the latest money merry-go-round finance measures put in place by Zimbabwe to try to attract investors.

Zimbabwe’s battered economy has continued to struggle, heightening an uncertain operating environment for companies.

The government insists, though, that opportunists are driving down the Zimbabwe dollar currency through speculative currency trading, hence the raft of new finance measures announced Monday.

The Reserve Bank of

Zimbabwe said its Fidelity Printers unit will mint gold coins for use as a store of value on the local market after raising interest rates from 80 percent to 200 percent. Zimbabwe’s year on year inflation rate currently stands at 192 percent for the month of June.

In a subsequent notice to banks dated June 28, the central bank has also hiked “the minimum deposit rate for Zimdollar savings from the current 12.5 percent to 40 percent per annum” while also mandating that “no other person may borrow on behalf” of another.

“Banks will be guided by the apex bank policy rate. While we expected that the interest rate would have to go up, the magnitude is overboard and reflects that this kind of aggressiveness is out of desperation to contain the inflation and monetary sector mess,” a finance director with a Zimbabwean finance institution said.

Finance Minister Mthuli Ncube has also sought to contain an emerging civil service unrest situation by hiking salaries for government employees by as much as 100 percent in addition to other non-monetary benefits.

The government of Zimbabwe has sought to re-assure investors after gazetting into law a statutory instrument that makes the US Dollar legal tender for the next five years and mandates that borrowings in foreign currency be legally payable back in hard currency.

However, fewer economic players have been moved by the latest measures introduced by the Reserve Bank of Zimbabwe and Treasury. Confidence is still problematic and efforts to try to force business to adopt the problematic official exchange rate - it trails the much more popular street rate by multiples - have stoked up worries of price controls.

- FIN24.