Online Reporter
Business Reporter
THE International Monetary Fund (IMF) has applauded Zimbabwe for ending the practice of printing money to finance Government projects, known as quasi-fiscal operations, saying the move has significantly helped the country to contain inflation and stabilise the exchange rate.
IMF African Department director, Mr Abebe Aemro Selassie, told journalists during the presentation of the new regional economic outlook for sub-Saharan Africa, during the IMF-World Bank Annual Spring Meetings in Washington DC, United States, that the “diminished recourse” to the Reserve Bank of Zimbabwe financing window has been a key move of recent policy efforts now helping to achieve progress towards restoring macroeconomic stability in an economy long plagued by hyperinflation and exchange rate volatility.
Mr Selassie further observed that the country’s policies have contributed to solid economic performance, even in the absence of the concessional financing that other countries in the region utilise.
“Zimbabwe has gone through quite a lot of challenges in recent years…and one of the things that distinguishes Zimbabwe from other countries in the region has been that they have not been able to access concessional financing to the same degree that others have, helping defray the impact of all of these global shocks of recent years,” said Mr Selassie.
“Against this difficult backdrop, it has been good to see that…the country has been trying to put in place the right policies.
“Recourse to central bank financing has diminished quite a bit. It will be important to sustain that because it’s this repeated recourse to central bank financing that has created a lot of difficulties in the past also with inflation, with exchange rate volatility and the difficult foreign exchange environment that the country has. So we are encouraged by what the Government has been doing in recent months, and I think that needs to be sustained,” he added
Upon his appointment as RBZ Governor early last year, Dr John Mushayavanhu pledged to stop the practice of printing money to fund Government expenditures.
He emphasised that his mandate, as defined by the RBZ Act, was strictly monetary policy, and he had no intention of encroaching on the duties of other Government departments.
Essentially, he promised to stick to the central bank’s core job and refuse to participate in the printing of money that financed projects the government should ordinarily fund through taxes or borrowing—a practice that historically fuelled Zimbabwe’s severe hyperinflation and currency volatility.
