Vusumuzi Dube
Judith Phiri, Business Reporter
ZIMBABWE is expected to register a current account surplus for the fifth consecutive year since 2019, as the external sector position remains favourable.
A current account surplus means that a country has more exports and incoming payments than imports and outgoing payments to other countries. It is generally deemed a positive because the current account surplus adds to a country’s reserves.
In the 2023 Mid-term Monetary Policy statement, Reserve Bank of Zimbabwe (RBZ) Governor Dr John Mangudya said the policy measures put in place by the Bank and Government have re-oriented the country onto the right track to macroeconomic stability.
“As such, the Bank is staying the course to price stability by maintaining the current tight monetary policy stance during the six months to December 2023, with fine tuning on open market operations to ensure attainment of the full benefits of monetary and fiscal consolidation to sustainably anchor inflation and exchange rate expectations,” he said.
“Precisely, the country’s balance of payments current account has been in a surplus position since 2019 and is projected to close the year 2023 with a surplus of US$274.5 million. On the monetary front, money supply growth has been under control as evidenced by the slow growth in local currency lending since January 2023.”
He said the country’s macroeconomic fundamentals have remained strong to support and sustain the current price and exchange rate stability as attested by the continued favourable balance of payments, low growth in money supply, and a safe and sound banking sector.
Dr Mangudya said the banking sector and national payments system remain resilient, safe and sound to support the envisaged growth.
He said the domestic economic prospects remain robust with economic growth projected at 5.3 percent in 2023, despite the volatility in the exchange rate during the second quarter of 2023.
Dr Mangudya added: “Annual inflation which rose sharply in June 2023 to 175.8 percent reversed considerably to 101.3 percent in July 2023. It is expected to progressively decline in the near term as the monetary and fiscal policy measures put in place in June 2023 take full effect.”
He said monthly inflation is expected to continue to moderate during the second half of the year to pre-May 2023 levels of less than 3 percent.
While, the annual inflation is also expected to continue to decline and end the year between 60 percent and 70 percent.
Dr Mangudya said policy rates are expected to be aligned with the positive inflation developments in the economy.
He said the liberalisation of the foreign exchange market has brought sanity and calmness to the domestic foreign exchange markets, with the parallel exchange rate premium now below 20 percent.
The Governor said the wholesale auction system has also strengthened the interbank for foreign exchange and is central to the determination of the market exchange rate.
He said: “The bank shall strengthen the operation of the Non-negotiable Certificate of Deposits (NNCDs) which are being used to mop excess local currency liquidity through the introduction of NNCDs with maturity profiles of 7,14, 21 and 30 days.”
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