eBusiness Weekly
Business Writer
The Monetary Policy Committee (MPC) of the Reserve Bank of Zimbabwe (RBZ), has lauded the Bank’s recent monetary policy measures on the economy saying they have had a positive effect of maintaining stability.
This week the chairperson of the committee, Dr John Mangudya, who is also the RBZ governor said; “The MPC noted with satisfaction that a combination of the tight monetary policy stance, favourable uptake of gold coins, effective monitoring and enforcement of market discipline by the Financial Intelligence Unit (FIU).
“Also the review and enhancement by Government of its procurement processes and practices to ensure value for money had resulted in the stability of the exchange rate and a decline in inflationary pressures.”
The RBZ introduced gold coins into the market in July this year as a store of value amid rising inflation and rapid depreciation of the local currency. The coins entered the market at US$1,823.83 apiece.
Such a price was viewed as limiting to the public but after a successful launch and increased demand the Bank decided to mint smaller denominations which are yet to be introduced.
“Following the successful launch of the gold coins on July 25, 2022 and in response to public demand, the Bank shall introduce and release into the market gold coins in units of a tenth ounce, quarter ounce and half an ounce for sale with effect from mid-November 2022,” RBZ Governor John Mangudya said earlier this month.
The MPC said a total of 10 000 gold coins had been minted and out of which 8 076 gold coins had been disbursed into the banking system and to agents for sale.
“A total of 6 799 gold coins had been sold as at August 26, 2022, with 75 percent having been bought by corporates and 25 percent by individuals. 95 percent of the gold coins sold were purchased in local currency and the balance in foreign currency,” Dr Mangudya said.
During the launch of the gold coins Dr Mangudya said, “The coins are an investment option, in order to preserve value for those with extra balances that have been used to chase excess liquidity in the market. This will put less pressure on the USD and stabilise the exchange rate.”
According to the governor at the time such benefits would filter down to the ordinary person as it meant prices in the economy will stabilise as the exchange rate remained stable. “If the price stabilises it will also benefit those that are currently chasing foreign currency for value preservation,” he said.
Economist Prof. Tony Hawkins when the coins were released predicted that the coins will be bought by companies that want to lock in value, traders in the market and some few individuals with such amounts lying around.
In terms of inflation and exchange rate, Prof Hawkins at the time said, “The coins might really work in the Bank’s favour because since one can trade it within the 180 days before it is eligible to be sold back to the RBZ, it is then liquid and that makes it attractive and will mop up excess balances.”
This has been realised as there was a decline in month-on-month inflation from 25,6 percent in July 2022 to 12,4 percent in August 2022 and the parallel market exchange rate declined from 950 per dollar to between 800-850 per dollar on the parallel market.
As for inflation the bank said, “As previously advised, it was expected that the month-on-month inflation would progressively decline, while annual inflation was expected to continue rising to reach an annual peak in September 2022 due to the lower base effect in 2021.”
Dr Mangudya said the MPC expects the parallel market rate, the interbank rate and the auction rate to converge in the near term, thereby fostering price stability and anchoring inflation and exchange rate expectations.
In order to maintain such a positive trajectory, the bank resolved to keep interest rates unchanged with the Bank policy rate at 200 percent per annum and the Medium Term Accommodation interest rate at 100 percent per annum.
