eBusiness Weekly
Business Writer
The Reserve Bank of Zimbabwe (RBZ) Monetary Policy Committee (MPC) has reiterated the need for the Apex Bank to remain focused on inflation and put additional policy measures in response to the resurging inflationary pressures and foreign exchange parallel market activities.
This came out at an MPC meeting held on 1 April 2021 whose agenda was to consider developments in the domestic and international macroeconomic environment as well as impact of global geopolitical factors on the economy.
RBZ Governor Dr John Mangudya in a statement said while noting the decline in month-on month inflation from 6,99 percent in February 2022 to 6,31 percent in March 2022, the Committee was concerned with escalation in annual inflation, from 66,77 percent to 72,70 percent.
“The Committee particularly noted that global inflation was on the increase as a consequence of the on-going Russia-Ukraine conflict, which had secondary pass through effects on domestic and international prices.
“Rising prices of oil, gas, fertilisers and other related products had the effect of increasing global inflation and inevitably had a negative impact on domestic costs of production and destabilising the foreign exchange market,” he said.
Russia is one of the top global producers of crude oil. After the Ukraine invasion, global prices of crude oil rose to 14-year highs driven by the sentiment that the conflict will cause a huge shortage of oil in the market. Since Zimbabwe does not mine petroleum, it is a net importer hence a price taker of the foregoing global oil prices.
According to Dr Mangudya, the Committee resolved to put in place with immediate effect measures that include reviewing upwards the Bank Policy Rate from 60 percent to 80 percent as well as reviewing upwards the Medium-Term Bank Accommodation Facility Interest Rate from 40 percent to 50 percent per annum.
RBZ last reviewed the interest rates in October 2021 to curb speculative borrowing.
Additional measures included reviewing upwards the minimum deposit rates for ZW$ savings and time deposits from 10 percent and 20 percent per annum to 12,5 percent and 25,5 percent respectively.
The Committee also affirmed further tightening monetary policy by reducing the quarterly reserve money growth target from 7,5 percent to 5 percent for the quarter ending June 2022.
“Further liberalising the foreign exchange market by allowing banks to conduct foreign exchange transactions of up US$1000 under an arrangement agreed upon between banks and Bank and in terms of which individuals with free funds and entities or corporates holding foreign exchange in their foreign currency accounts (after meeting the statutory surrender requirements) shall be free to sell foreign currency to banks on a willing-buyer willing-seller basis,” said Dr Mangudya.
He added that the Central bank will also ensure that commercial imports are processed through normal banking channels in line with international best practices.
