Announcing his monetary policy statement for the second half of 2006 on Wednesday, Reserve Bank Governor, Gideon Gono, said distortions in the market should be removed first before a new interest rate framework is announced.
"Within the framework of the roadmap to our recovery proposed in this policy statement, there is need to use the month of February as the soul-searching period, marked by decisive collective implementation of measures that remove the devastating distortions which have hitherto stood in the way of all efforts to turnaround the economy, before we can announce an interest rate framework that is consistent with an agreed programme of holistic measures," Gono said.
He said at current levels of 500 percent and 600 percent for secured and non-secured lending to banks respectively, the interest rate framework was appropriately aligned to both developments and outlook on the inflation front.
Zimbabwe's inflation is currently at 1 281,1 percent while the current rates were pegged in July last year.
Gono however said further reviews would be done on an ongoing basis, in the normal course of open market operations of the bank.
He defended the move by indicating that monetary policy tools alone without the support of complementary measures would not achieve the desired results in turning around the economy.
"Our experience over the past three years has amply demonstrated that singular application of traditional monetary policy tools, such as interest rates in the absence of concreted, holistic, well sequenced policy packages will only serve to throw the productive sectors deeper into stagflation-low capacity utilisation co-existing with high inflation," he said.
Meanwhile, Gono announced that the central bank had with immediate effect introduced multiple tenor bills to raise funds for government from the non-inflationary non-banking sectors of the economy.
Government borrowing from the central bank has been identified as one of the major causes driving inflation in the country.
Gono said the bills would be issued in tenors of one, two, three and five years. ' New Ziana.
