Staff Reporter
The Reserve Bank of Zimbabwe (RBZ) has reported significant progress in stabilising the exchange rate and inflation following the implementation of stringent monetary policy measures in September 2024.
In a press statement released, on December 4, 2024, following the MPC meeting held on December 3, 2024, RBZ Governor Dr. John Mushayavanhu said the measures, which were aimed at tightening liquidity and curbing speculative activities, have achieved their intended results.
“The Monetary Policy Committee (MPC) noted with satisfaction that the exchange rate and inflation have relatively stabilised since October 2024. This stability is reflected in the significant narrowing of the exchange rate premium and the deceleration of month-on-month inflation from 37.2% in October to 11.7% in November 2024," Dr. Mushayavanhu said.
Dr. Mushayavanhu attributed the October inflation spike to “a once-off depreciation of the ZiG against the US dollar, in September 2024” but noted that the central bank expects monthly inflation to moderate to pre-October levels in the coming months.
“The role of foreign currency inflows in supporting exchange rate stability, revealing that inflows increased by 19.1% to US$11.05 billion during the first ten months of 2024, compared to US$9.27 billion during the same period in 2023,” Dr. Mushayavanhu said.
To sustain this stability, the MPC resolved to maintain the tight monetary stance, keeping the Bank Policy Rate at 35% and statutory reserve requirements at 15% for savings and time deposits and 30% for demand and call deposits. The central bank also emphasised the importance of enhancing the efficiency of the interbank foreign exchange market.
“The recent gazetting by the Government of the 50/50 US$: ZiG corporate tax payment arrangement will go a long way in increasing willing sellers of foreign currency in the interbank forex market,” Dr. Mushayavanhu said.
In addition, the MPC introduced a Targeted Finance Facility (TFF) to support the productive sector, which will be administered through the banking system. “Operational modalities of the facility will be communicated to banks in due course; the central bank is committed to balancing economic growth with macroeconomic stability,” the Governor announced.
Financial analysts have welcomed the RBZ’s measures, describing them as critical to restoring confidence in the economy.
Tafadzwa Nyamande, an economic analyst, said the narrowing of the exchange rate premium and declining inflation were signs that the policies are yielding results.
The stability we are seeing reflects the effectiveness of the RBZ’s measures, and the increased foreign currency inflows are a positive indicator of improving fundamentals,” he said.
David Mavhunga, a financial analyst, also praised the introduction of the TFF.
“The facility could provide much-needed liquidity to the productive sector, which is key for economic recovery. The RBZ’s approach to maintaining a tight monetary stance while supporting growth is commendable,” Mavhunga said.
Meanwhile, RBZ reiterated its commitment to continue reviewing its policy stance in line with the exchange rate and inflation developments to ensure inflation expectations remain well-anchored.
