Argentina Tops Zimbabwe For World's Highest Interest Rate

Tyler Durden's Photo
by Tyler Durden
Thursday, Oct 26, 2023 - 06:45 AM

Zimbabwe has been unseated from its unenviable position of having the world’s highest interest rate by Argentina, after slashing borrowing costs to help boost economic growth.

Unlike Argentina, which raised borrowing costs by 15 percentage points to 133% on Oct. 12 to curb price inflation that’s running at 138%, government interventions in Zimbabwe have enabled it to cut rates.

Zimbabwe's monetary policy committee cut the benchmark interest rate to 130% from 150%, which lags Argentina’s 133%.

Annual inflation in Zimbabwe slowed to 18.4% in September from 77% a month earlier after the statistics office revised its methodology to take into account the dominant role the US dollar plays in the economy.

The ZimDollar remains well off its record lows against the greenback (in the official data)...

Zimbabwe's largest independent asset manager, Imara Asset Management, believe that the US dollar will remain the dominant currency in Zimbabwe even after the government’s December 2025 deadline to stop its use in the economy.

As Bloomberg notes, data from the national statistics agency showed 80% of all economic transactions in Zimbabwe are now done in the greenback, up from 75% earlier this year.

“We are making the bold assumption that the US dollar will remain in place for a good while yet,” wrote John Legat and Shelton Sibanda, the company’s chief executive officer and chief investment officer, wrote in a quarterly note to clients Thursday. “The loss of the use of the US dollar would be a disaster for the economy.”

Finally, we note that Imara also cast doubt on the gold-backed digital money, the so-called “ZiG” launched earlier this month. It said there is no proof that the ZiG is either backed by any physical gold or can be converted into gold and is largely a “project” of the central bank.

“Whether the ministry of finance also supports the concept is still relatively unknown,” the Harare-based brokerage said.

Meanwhile, across the ocean, with a presidential runoff election looming, Argentina is a shitshow with triple-digit inflation and a plummeting currency with the economy lurching into its sixth recession in a decade.

Establishment Economy Minister Sergio Massa will now face self-described anarcho-capitalist Javier Milei in a runoff on Nov. 19.

Massa hails from the moderate wing of the populist Peronist movement, which has dominated Argentine politics for four decades, promised a more-of-the-same unity government to stabilise the economy.

Milei is a first-term congressman who founded his La Libertad Avanza party in 2021, who is promising to dollarize the economy and shut down Argentina’s central bank.

Former Argentine presidential candidate Patricia Bullrich, who placed third in Sunday’s election, endorsed right-wing populist Javier Milei on Wednesday for next month’s runoff, a move that could rupture the country's main center-right opposition coalition.

“In the case of Javier Milei, we have differences, and that’s why we competed. We don’t overlook them. However, we are faced with the dilemma of change or the continuation of a mafia-style governance for Argentina and putting an end to the shame of the present. We have the obligation not to remain neutral," Bullrich told a news conference.

“The country needs a fundamental change," Bullrich added, warning against a “continuation of the worst government in history.”

Amid the election cycle, the country is struggling to get back on track with a massive aid program from the International Monetary Fund that’s faced several setbacks in the past year.

The informal dollar (blue dolar) has collapsed to worse than 1100/USD...

In the battle of the biggest losers, Argentina (who play England in the Bronze match of the Rugby World Cup on Friday) has taken over from Zimbabwe, the world's worst currency-manager.