Chronicle EditorNqobile Bhebhe, [email protected]
THE Reserve Bank of Zimbabwe’s Monetary Policy Committee projects that year-end inflation will remain below five percent due to a stable exchange rate and it intends to uphold the tight monetary policy stance to preserve the ongoing stability.
The committee has expressed its unwavering dedication to detect and tackle any potential risks to the current stability.
The RBZ Monetary Policy Committee (MPC) met on Wednesday to assess the performance of the Monetary Policy Statement measures announced on April 5, 2024 and to deliberate on recent macroeconomic and financial developments in the economy.
It acknowledged the effectiveness of the stabilisation measures implemented by the central bank from the start of April 2024, leading to a May 2024 month-on-month ZiG inflation rate of minus 2,4 percent.
“The inflation rate is expected to be around zero percent in June 2024 due to declines in both food and non-food inflation. Inflation pressures will remain subdued in the outlook period with projected inflation to end the year below five percent as the exchange rate remains stable,” said RBZ Governor, Dr John Mushayavanhu.
Dr Mushayavanhu said during the deliberations, the MPC resolved to maintain the current tight monetary policy stance to ensure the sustenance of the current stability.
The Committee resolved to maintain the current Bank Policy rate at 20 percent per annum and an interest rate corridor of 11 percent to 25 percent.
Additionally, the statutory reserve requirements for demand deposits, and savings and time deposits in ZiG remain at 15 percent and five percent, respectively.
Also, the committee said foreign currency statutory reserve requirements for demand deposits, and savings and time deposits at 20 percent and five percent, respectively remain unchanged.
“Going forward, the MPC fully commits to proactively address any emerging risks on current stability. The MPC will ensure that growth in money supply remains consistent with the achievement of the envisaged pro-growth inflation levels of five percent.
“The Reserve Bank will continue to ensure full backing of the reserve money with gold, other precious minerals, and foreign currency reserves. This will ensure that growth in reserve money is consistent with improved economic activity and increased reserves backing the domestic currency,” said Dr Mushayavanhu.
In April, the central bank introduced ZiG as part of a raft of policy interventions to address exchange rate volatility, curtail inflation and restore macro-economic stability.
It is backed by precious minerals, mainly gold and foreign currency. Zimbabwe has 2,5 tonnes of gold and US$300 million in cash reserves to back the new currency.
Of the gold reserves, 1,5 tonnes are held at the RBZ vaults and one tonne is held offshore.
The MPC was established in 2019 with a view to proffer advisory insight towards implementation of currency and economic reforms meant to restore key fundamentals to stabilise the economy.
Its role entails determining the monetary policy of Zimbabwe, including the setting of limits on open market operations by the bank and ensuring price stability as defined by the Government’s inflation target in the national budget.
The committee also determines interest rates in line with the Government’s economic policies and targets for growth and employment creation as well as other monetary policy functions, as the finance minister may prescribe by way of regulations.
Online Reporter