‘Maintain tight monetary policy stance’

CLOUDINE MATOLA

The Reserve Bank of Zimbabwe (RBZ) should stay the course of the tight monetary policy stance  to maintain macroeconomic stability, economists have said.

This comes after the prices of basic commodities in both formal and informal market have stabilised.

Inflation rate has also stabilised.

In the month of June, the month-on-month inflation rate was 0% in ZiG terms and in US dollar terms there was a deflation of -2.4%.

Annual inflation rate in US dollar terms rose to 3.8% in June 2024 from 3.5% in May 2024.

“We obviously need to stick to the prescription, the macroeconomic prescription of a tight monetary policy and also a tight fiscal policy. So the two must complement each other. In the past, unsustainable growth in money supply the has been the biggest culprit in terms of driving instability,” economist, Dr Prosper Chitambara told Business Times.

He added: “So we need to sustain the current macroeconomic policy thrust because it’s not going to be easy, I think. Given the fact that we are in a drought, there’s going to be a lot of pressure on public spending.”

Another economist, Persistence Gwanyanya said: “The question is how sustainable is this to support all the other efforts and imperatives that we see in the country. I see this as sustainable as long as we walk the talk the policy makers walk the talk in respect of monetary expansion .

We have seen discipline  in the market, which is a break from the past.

“Despite the capital projects that government is undertaking we have seen budget management being prioritised.”

He added that:”And going forward, we expect judicious management of the country’s resources to continue supporting stability.”

Economic analyst, Victor Boroma said:”For the stability to be sustainable, the central bank needs to end all quasi fiscal operations that cause unrestrained money supply growth and trigger artificial demand for forex. The bank needs to stick to its core mandate of managing inflation and bank supervision. This also means 100% liberalisation of the foreign exchange market to a market driven one. Finally, to end all parallel funding of government of government expenditure. This will ensure local currency stability.”