RBZ CLAIMS VICTORY IN FIGHT AGAINST INFLATION AND EXCHANGE RATE WOES
The Reserve Bank of Zimbabwe (RBZ) has said it is winning the battle to bring stability to the country’s economy. According to the RBZ, its efforts to control inflation and stabilize the exchange rate are now working. This comes after it injected US$150 million into the foreign exchange market as part of its monetary policy measures.
In a recent statement, the RBZ Monetary Policy Committee (MPC) shared its findings. The committee met on December 3, 2024, to review how the policies introduced on September 27, 2024, were performing. It said these measures have tightened the flow of money in the economy and stopped speculative activities in the foreign exchange market.
The RBZ reported that the exchange rate and inflation have been steady since October 2024. In October, month-on-month inflation was at a high 37.2%. By November, it had dropped to 11.7%. The RBZ explained that the sharp rise in October was due to a one-time drop in the value of the Zimbabwean dollar (ZiG) against the US dollar in September. Now, the RBZ expects inflation to go back to the lower levels seen before October 2024.
The RBZ also noted an increase in foreign currency inflows. From January to October 2024, the country received US$11.05 billion, which is 19.1% more than the US$9.27 billion recorded in the same period in 2023. This increase in foreign currency is helping to keep the exchange rate stable.
To maintain this stability, the MPC decided to keep its tight monetary policies in place. The main measures include:
- Keeping the Bank Policy rate at 35%.
- Maintaining statutory reserve requirements for savings and time deposits at 15% and for demand and call deposits at 30%.
- Improving how the interbank foreign exchange market works to make it more efficient.
The MPC also welcomed a new law by the government that requires companies to pay their corporate tax in a 50/50 mix of US dollars and ZiG. This move is expected to encourage more sellers to offer foreign currency in the interbank market.
To support businesses and ensure the tight money supply does not harm economic growth, the MPC announced a Targeted Finance Facility (TFF). This facility will provide financial support to key sectors through banks. Details about how this facility will work will be shared with banks soon.
The RBZ said it will keep watching the situation and adjust its policies based on how inflation and the exchange rate behave. With these steps, the central bank is optimistic that Zimbabwe will continue to see economic stability in the months ahead.
