Zimbabwe Plans Monetary Policy Committee, Benchmark Rate

(Bloomberg) -- Zimbabwe plans to establish a monetary policy committee and set a benchmark interest rate as it tries to stabilize an economy that has all but collapsed and build confidence in its own newly launched currency.

The country will also put in place an inflation-targeting regime, George Guvamatanga, permanent secretary in the Zimbabwe Ministry of Finance, said by text message on Friday. “There will be a return to a full monetary policy framework,” he said, without giving timing.

The reforms would be the latest implemented to try and quell an economic crisis that’s pushed the inflation rate to its highest since 2008, when price growth reached an estimated 500 billion percent. That led Zimbabwe to abandon its own currency in favor of the dollar in 2009.

Last month, under new Finance Minister Mthuli Ncube, the government authorized the trade of local securities known as bond notes and their electronic equivalent on an inter-bank market and said it will allow market participants to set the rate. Trade in the units, now known as RTGS dollars, began at 2.5 per dollar and fell to 2.5219 per dollar on Friday, their lowest since trade began. The government had previously insisted that bond notes traded at par with the dollar even though they exchanged hands at a steep discount on the black market.

The southern Africa nation faces shortages of good such as gasoline and bread. A fuel price hike in January led to the worst riots since 1995, which were only quelled when the military was deployed and opened fire on crowds, killing at least 17 people.

To contact the reporter on this story: Antony Sguazzin in Johannesburg at asguazzin@bloomberg.net

To contact the editors responsible for this story: Riad Hamade at rhamade@bloomberg.net, Rene Vollgraaff

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