World Bank credits RBZ policy stance for macroeconomic stability
Business Reporter
Global financier, World Bank (WB) has credited the tight policy stance employed by the Reserve Bank of Zimbabwe (RBZ) for realigning the economy to the stability margins.
The dossier entitled Zimbabwe Economic Update acknowledges the far-reaching positive impact of the economic measures put in place by the central bank to ease volatility risks in the economy.
The document says in previous years, quasi-fiscal activities by the Reserve Bank of Zimbabwe severely impacted on inflation due to an expansionary monetary supply and deterioration in the balance sheet.
“But recent monetary policy tightening has limited volatility. Since June 2023, the RBZ has been proactive in tightening monetary policy; increasing reserve requirements for the banking sector and raising the bank policy lending rate.
“Furthermore, reserve money growth was curbed by issuing non-negotiable certificates of deposits (NNCDs) and Gold-Backed Digital Tokens to absorb excess Zimbabwe dollars. While inflationary pressures have started to abate,” the WB report said.
The global financier said the use of US$ which was initially planned to end in 2025 was recently extended and in the process helping to bring certainty on the use of foreign currency and help financial sector to continue lending in US$.
“The proposed removal of the limit of 10% trading margin above the interbank rate will further help move to a market-based exchange rate,” WB said.
The organ hailed the financial sector for remaining adequately capitalized, with non-performing loans (NPLs) at very low levels. The financial sector has significant capital reserves² and can withstand unexpected shocks or losses.
The report observed that banking institutions remain compliant with the prescribed minimum capital adequacy ratio of 12% and tier 1 ratio of 8%, although the recapitalization of all banks has still to be completed.
However, despite some recent achievements, the WB said Zimbabwe’s electricity sector still faces major challenges of significant power deficits.
“In 2020, the available generation capacity was 1,585 MW compared with peak demand of 1,900 MW, forcing power outages of 12–14 hours a day. While the Government commissioned an additional 600 MW at the Hwange power station in 2023, installed capacity is currently still insufficient to meet demand,” added WB.
