RBZ vows to maintain tight monetary policy
LIVINGSTONE MARUFU
The Reserve Bank of Zimbabwe (RBZ) yesterday said it will maintain its tight monetary policy stance in an attempt to extricate the economy from its woes.
RBZ deputy governor, Dr Innocent Matshe confirmed the development saying:
The currency rate has been increasingly volatile due to market speculation and negative inflation expectations.
“The Monetary Policy Committee [MPC] in its wisdom will continue to monitor monetary conditions and ensure that exchange rate developments reflect market fundamentals. By these measures, we expect the economy to self correct and stabilise in November with an increase month on month in October,” Matshe said.
He added: “We believe that the monetary policy framework is strong enough to be on top of inflationary pressures this festive season.That means that we have to stay the course.”
He said 2025 month on month inflation is expected to be steadily low throughout the year.
“We believe that the December target of 5% is still achievable, if we continue with the tight monetary policy stance. We also believe that we can halve that if stability remains. Going forward, to ensure that the stability remains, we will be looking at prudent fiscal management with no recourse with the central bank.I can confirm that the Treasury had no recourse with the central bank for quite a while,” he said.
According to the latest data from the Zimbabwe National Statistics Agency (ZimStat), month-on-month inflation surges to 5.8% in September 2024, a sharp rise from 1.4% in August.
Economist Vince Musewe said: “Tightening availability of ZiG will not make it stronger. It merely delays the inevitable. In fact people will just use the US$ more and not bank it. Let’s just get that right, it’s not about supply side economics, it’s all about the perceived value of the ZiG.”
According to Zimbabwe National Chamber of Commerce president Tapiwa Karoro said the prevailing market conditions seem in tandem with the objectives of the September 27 MPC resolutions which basically aimed to tighten liquidity and reign in local currency funds chasing after the commoditised US dollar, among other commodities by increasing the Bank Policy rate from 20% to 35%, as well as increasing the statutory reserve requirements for both ZiG and USD demand and call deposits to a standardised 30%, and for savings and time deposits to 15%.
“This policy position by the RBZ is responsive to the volatile market conditions and, I would think, therefore reviewable subject to the goals of price and currency stability being attained. It would be naive for us as economic players, and unfair on the monetary authorities to think that this policy position is the panacea to the current currency woes and broad based economic challenges. However, as the private sector we continue to give our input to the RBZ, constructively interrogate proposed and implemented policies, while proffering alternative solutions and/or supporting aligned policy direction,” Karoro said.