Staff Reporter
Measures implemented by the Reserve Bank of Zimbabwe (RBZ) have successfully curbed exchange rate volatility, bringing stability to the ZiG currency over the past five months.
This comes after the initial challenges faced following the currency’s introduction in April 2024.
In its early stages, the ZiG lost significant value as a result of the wide disparity between the official exchange rate of 13.56 to the US dollar and the parallel market rate, which ranged between 40 and 50.
In response, the RBZ devalued the currency to 23.56 and introduced a series of stringent monetary policies to address inflationary pressures and exchange rate instability.
Key among these interventions was the upward revision of statutory reserve requirements, which effectively curbed money supply growth.
Financial economist, Batanai Matsika, highlighted the success of the Central Bank’s approach.
“The liquidity management measures introduced through a tight monetary policy stance have contributed to macroeconomic stability. The RBZ’s focus on controlling money supply growth has mitigated threats to exchange rate stability, despite the resultant liquidity crunch. The local currency has remained stable, particularly over the last quarter,” he said.
Economist Dr. Prosper Chitambara concurred, noting that the RBZ’s framework has not only stabilized the exchange rate but also helped contain inflationary pressures.
“The tight monetary policy has reduced liquidity in the economy as pledged by RBZ Governor Dr. John Mushayavanhu. Over the last four to five months, the ZiG has been very stable, even gaining on the parallel market,” he observed.
This newfound stability has created a favourable environment for businesses and industries to operate sustainably.
Marginal monthly gains in the local currency have been a key factor in boosting economic confidence.
The RBZ’s continued focus on monetary discipline and effective liquidity management will be crucial in maintaining the stability of the ZiG and fostering sustainable economic growth.
The current environment demonstrates the effectiveness of proactive monetary policies in addressing market challenges and supporting broader national development goals.
