In an unexpected move that has caught markets by surprise, the Democratic Republic of Congo’s central bank has announced a sharp increase in its main interest rate. As per a statement released on Tuesday, the rate has been hiked to 25%, marking a significant jump from the previous 11%.
This decision appears to be an aggressive attempt by the central bank to tackle mounting inflationary pressures and stabilize the country’s currency.
Over the past months, the Democratic Republic of Congo has grappled with economic challenges, including fluctuating commodity prices, especially in the mining sector which is a significant part of its export earnings.
Analysts speculate this move aims to curtail excessive liquidity in the market, bolster the national currency’s value, and bring in foreign investment by offering attractive returns.
An interest rate hike of this magnitude is also expected to curtail borrowing, which in turn might reduce spending and help control inflation.
This decision is not without potential drawbacks. The higher interest rate might deter domestic investments and increase the cost of borrowing for businesses, potentially slowing down economic activity in the short term.