Reserve Bank of Zimbabwe makes headway in clearing auction backlog

THE Reserve Bank of Zimbabwe (RBZ) has made progress in clearing the auction allotments backlog while monetary policy decisions instituted recently have helped to stabilise the exchange rate and prices, the Monetary Policy Committee (MPC) has said.

The central bank's MPC said this at a meeting held on December 3, which deliberated on macro-economic and financial developments in the economy as well as the progress made in the implementation of the monetary policy measures announced on 28 October 2021.

"The committee expressed satisfaction on the progress made by the bank in clearing the ring-fenced auction backlog allotments and resolved that, in view of the forthcoming festive season, the last auction for 2021 will be on 14 December 2021 and the first auction for 2022 will be on 11 January 2021.

"The committee noted with satisfaction that the previous monetary policy decisions had helped to stabilise the exchange rate and domestic prices," read part of a statement by Governor, John Mangudya, who chairs the committee.

Dr Mangudya said the recent monetary policy measures had reversed the upward trend on month-on month inflation, which rose from 4,2 percent in August to 6,4 percent in October and decelerated to 5,76 percent in November.

"It was expected that month-on-month inflation would continue declining to low and sustainable levels in the outlook period. It was also expected that annual inflation would end the year 2021 at between 58 percent and 60 percent and at less than 20 percent in 2022," he said.

The central bank governor indicated in a statement issued following the meeting of the Committee that the country was on course to attaining a positive economic growth target of 7,8 percent in 2021 and 5,5 percent in 2022.

He said the positive growth trajectory was also confirmed by the International Monetary Fund (IMF) during the recently concluded Article IV Mission for Zimbabwe, which revised upwards the country's projected real GDP growth rate for 2021, from the initial 5,1 percent to 6,0 percent.

Dr Mangudya said in light of obtaining macro-economic stability, the committee resolved to maintain the existing monetary policy stance. These include maintaining the bank policy rate at 60 percent and the Medium Term Bank Accommodation (MBA) Facility interest rate at 40 percent as well as keeping statutory reserve requirements for demand/call deposits at 10 percent and at 2,5 percent for savings and time deposits.

Other policy measures include maintaining the minimum deposit rates for Zimbabwe dollar savings and time deposits at 10 percent and 20 percent, respectively with a view to sustaining the appeal of the local currency as an investment currency.

Further monetary policy measures entail maintaining the reserve money growth target at 10 percent for the fourth quarter of 2021 and the first and second quarters of 2022.

"The committee affirmed its commitment to continue refining the Bank's open market operations (OMO) instruments to support optimal liquidity management.

"In view of the significant increase in total bank deposits during the past year, the Committee also resolved to monitor developments on broad money to minimise its possible destabilising effects on inflation and the exchange rate," said Dr Mangudya.

He said the committee urged the productive sectors of the economy, including the micro, small and medium enterprises (MSMEs), to continue utilising the available financial support under the Bank's MBA Facility to enhance production and financial inclusion.