RBZ to launch disinflation programme

December 27, 2019

The Reserve Bank of Zimbabwe(RBZ) will next year put in place an ambitious programme to contain hyperinflation,which is ravaging the economy,deputy governor Kupikile Mlambo has said.

Although government stopped publishing annual inflation rates after it reached 176% in June, Zimbabwe’s inflation rate is estimated to be hovering around 500%. Month on month inflation soared from 17% in September to 38% in October. But receded to 17% in November.Due to price increases during this festive season, it is expected to skyrocket again.

The increase in inflation in 2019 reflected pass through effects of the exchange rate and price shocks.

Mlambo said the programme will see the central bank limiting the reserve money growth to contain inflation, stabilise the exchange rate, minimization of shocks and limit government recourse to central bank financing.

“Inflation has emerged as a major challenge to economic growth and macroeconomic stability.As a way forward, we will put in place a robust disinflation programme in 2020,”Mlambo told Business Times.

Mlambo expects the monthly inflation rate tovprogressively decline to below 5% in the second half of 2020, underpinned by a monetary targeting programme.

Since June this year, there was significant increase in reserve money, resulting in inflation rate surging. Reserve money reached ZWL$7bn in November from ZWL$3,6bn in June.

To stabilise the exchange rate, the central bank will set up working group to review operations of the interbank foreign exchange market. It has also resolved to implement a tracker under the Reuters system to enhance transparency in the operations of the interbank market.
To ensure price stability, Mlambo said this will be anchored on forward guidance where the central bank will provide a critical role in signalling the future course of monetary policy action. It will also encourage banks to provide long term finance to firms and households. Apart from that, the apex bank will have a liquidity management framework in place. This will be in the form of open market operations and standing facilities to manage liquidity and achieve specific monetary targets.

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