RESERVE Bank of Zimbabwe’s (RBZ) has introduced a raft of measures aimed at boosting economic productivity, addressing inflationary push factors and strengthening the local currency.
Presenting the first Monetary Policy Statement for the year 2022, RBZ governor, John Mangudya said the latest blueprint has maintained a tight stance to support the on-going real economic recovery growth of 5,5% expected in 2022 and higher potential growth rates in the medium to long term, consistent with NDS1 and Vision 2030.
The MPS bank reviewed downwards the quarter-on-quarter reserve money target from 10% to 7,5% for the quarters ending March and June 2022, which target will be reviewed thereafter.
The measure is aimed at mopping up excess cash which the authorities have since blamed for fuelling exchange rate depreciation on the parallel market and speculatively increasing inflation.
“The revised quarterly reserve money growth target is consistent with the envisaged economic growth rate of 5.5% in 2022 and the expected year-end inflation of 25-35 %,” said Mangudya.
RBZ has also tabled plans to aggressively manage liquidity through maintaining Open Market Operations (OMOs) to liquidity injections by Government to avoid excess liquidity in the banking system emanating mainly from payments for infrastructural development projects.
In a move aimed at promoting borrowing to boost productivity, the policy rate, which is the rate at which the central bank is willing to lend money to commercial banks, was maintained at the current levels of 60% and 40%, respectively.
Through it, the central bank influences short-term interest rates and the money supply in the economy, the rate at which the central bank is willing to lend money to commercial banks.
New measures to tighten the screws on the Reserve Bank of Zimbabwe (RBZ) Foreign Exchange Auction system were put in place.
There will be strict adherence to and enforcement of the Know Your Customer (KYC) and Customer Due Diligence (CDD) principles and requirements by banks when processing forex bids and intra-bank transfers on behalf of their customers.
The measures are also in place to ensure timeous settlement of auction bid allotments within a period of two weeks and allotment of foreign currency on the basis of available foreign exchange to avoid incidences of settlement backlogs.
“The effectiveness and predictability of monetary policy requires the support of consumers and business. In this regard, the Bank is encouraged with the continuous moral suasion engagements which it has established with the business community to find lasting solutions to stabilising the local currency and improve trust within the economy.
“This is critical for the common good of the economy in pursuing common objectives which is fundamental for unity of purpose,” added Mangudya.