Online Reporter
AFTER 14 months of low monthly inflation in ZiG terms, reflected in the annual inflation rate of 4,1 percent in January this year and 3,8 percent in February after the higher monthly inflation before last year was no longer part of the calculations, Zimbabweans are starting to have a lot more confidence in their own currency.
But in the careful and conservative 2026 Monetary Policy Statement at the end of last week, Reserve Bank of Zimbabwe Governor Dr John Mushayavanhu made it crystal clear that the RBZ will maintain its monetary discipline, matching the Government’s fiscal discipline, and would not lower the bank rate, which sets the cost of ordinary borrowing, from the existing 35 percent until the new low inflation rates were entrenched in Zimbabwe’s economic culture.
Past successes in the battle against inflation have sometimes been upset by those who like high-inflation’s trend of moving wealth from the poor to the rich, and by businesses scared that suddenly inflation might return.
By maintaining the macro discipline to preserve low inflation, Dr Mushayavanhu wants to see everyone recognising that the battle has been won before some fruits of victory are handed out.
So maintaining this low annual inflation in the low and middle single figures remains a primary focus of the Reserve Bank.
The ZiG will remain fully backed by gold and foreign reserves, and the reserves are being built up until they move into the bracket of three to six months import cover, the general prudent figure economists want to see.
However, within the maintenance and build up of confidence, the Reserve Bank was more than happy to push through a set of reforms that will make it easier and cheaper to do business as bank charges are slashed.
In addition, foreign exchange trading, now done through the banking system using market forces, will be further upgraded and modernised using new software.
New measures allow banks to invest in the ZiG denominated term deposit facility, so they can start making use of any surpluses of local currency over normal demand.
The special facility for productive-export led concerns with its lower interest rates has been both upgraded to make sure that producers are the only ones to benefit and doubled in size.
As has been typical of the successful reforms, the Reserve Bank wants to both eliminate cheating and make sure that those who do benefit are chosen within a system without any favouritism.
For the ordinary Zimbabwean consumer and smaller business owners, digital transactions have been made more attractive and cheaper, so making it simpler and easier for everyone and every business to operate within the banking system, rather than relying on cash moving around with its attraction for criminals.
Banks voluntarily cut to zero service charges on accounts under US$100 or the ZiG equivalent and transaction charges on US$5 or less. The Reserve Bank itself has started cutting the rates on its transfer charges between banks.
Banks now must cut the transaction charges at point of sale machines and are now forbidden to impose a minimum fee. Cash withdrawal charges, for ZiG and US dollar bank notes at ATM and at teller counters have been cut.
With a stable exchange rate, and a parallel rate that has slumped to significantly under 20 percent and still falling, the willing-buyers and willing-sellers are both using the banking system.
The Reserve Bank is taking advantage of its growing reserves to ensure changes in rates are smooth, regardless of direction. With both a positive trade balance, that is Zimbabwe exports more than it imports, and a positive current account, that is foreign currency inflows exceed outflows, pressure on exchange rates has eased considerably.
The Reserve Bank is now upgrading the banking system to make foreign currency trading even more transparent and ensure it remains under market forces, commissioning new software.
That this is Zimbabwean produced is a plus, but the bank is determined it will be fully tested and validated before being used.
The new ZiG notes, of ZiG10, ZiG20 and ZiG50, come out in April and will be followed, as circumstances permit, by the ZiG100 and ZiG 200.
This should start filling the gaps for small change, bus fares and the like, with ever more people using digital money as costs fall. We do not think that the new notes will be seen as anything more than filling a gap at the lower end of the market.
The switch to monocurrency is now no longer a date in a future calendar. Rather the switch will be set by events, occurring when no one cares whether they are paid in foreign currency or local currency. This will help to calm nerves among those who still care.
Generally, the Monetary Policy for this year is maintain the discipline, make sure people believe inflation is conquered as the measures are retained, but to make doing business through banks cheaper and easier and keep Zimbabwe on course.
dyton mupawaenda