News / National
RBZ keeps rates steady
05 Dec 2024 at 06:55hrs | Views
Reserve Bank of Zimbabwe (RBZ) Governor John Mushayavanhu has announced that the bank policy rate will remain at 35%, and statutory reserve requirements will stay unchanged, as the central bank seeks to stabilize the exchange rate and curb inflation.
The decision follows a tumultuous period in September when the Zimbabwe Gold (ZiG) currency experienced its largest single-day drop, plummeting from US$1:ZiG13.99 to US$1:ZiG24.39. The depreciation sparked volatility in the market, compounded by the 2025 national budget's substantial 130.39% increase in expenditures, which has raised concerns about inflationary pressures.
In the 2025 budget, ZiG276.4 billion was allocated for expenditures, surpassing expected revenues of ZiG270.3 billion. Similarly, the 2024 fiscal year is projected to end with a deficit, with expenditures at ZiG119.97 billion against revenues of ZiG110.7 billion.
Following a Monetary Policy Committee (MPC) meeting last Friday, Mushayavanhu noted improvements in the financial landscape since October 2024.
"The MPC noted that the measures, as intended, have managed to tighten liquidity conditions and curtail speculative activities in the foreign exchange market. In this regard, the MPC noted with satisfaction that the exchange rate and inflation have relatively stabilised since October 2024," Mushayavanhu stated.
He highlighted that month-on-month inflation had dropped significantly from 37.2% in October to 11.7% in November, attributing the October spike to the one-off depreciation of the ZiG in September.
The central bank pointed to increased foreign currency inflows as a contributing factor to the improved stability. Inflows rose by 19.1%, reaching US$11.05 billion in the first 10 months of 2024, compared to US$9.27 billion during the same period in 2023.
Mushayavanhu expressed confidence that inflation would remain stable and return to pre-October levels, supported by these inflows and ongoing monetary policies.
The MPC resolved to maintain its tight monetary policy, which includes: 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%. Enhancing the efficiency of the interbank foreign exchange market.
Mushayavanhu also highlighted that the quarterly corporate tax payments split 50/50 between US dollars and ZiG would bolster foreign currency liquidity in the interbank forex market.
The measures aim to sustain market confidence, stabilize the local currency, and ensure that the economy weathers the challenges posed by the fiscal and monetary imbalances.
The decision follows a tumultuous period in September when the Zimbabwe Gold (ZiG) currency experienced its largest single-day drop, plummeting from US$1:ZiG13.99 to US$1:ZiG24.39. The depreciation sparked volatility in the market, compounded by the 2025 national budget's substantial 130.39% increase in expenditures, which has raised concerns about inflationary pressures.
In the 2025 budget, ZiG276.4 billion was allocated for expenditures, surpassing expected revenues of ZiG270.3 billion. Similarly, the 2024 fiscal year is projected to end with a deficit, with expenditures at ZiG119.97 billion against revenues of ZiG110.7 billion.
Following a Monetary Policy Committee (MPC) meeting last Friday, Mushayavanhu noted improvements in the financial landscape since October 2024.
"The MPC noted that the measures, as intended, have managed to tighten liquidity conditions and curtail speculative activities in the foreign exchange market. In this regard, the MPC noted with satisfaction that the exchange rate and inflation have relatively stabilised since October 2024," Mushayavanhu stated.
He highlighted that month-on-month inflation had dropped significantly from 37.2% in October to 11.7% in November, attributing the October spike to the one-off depreciation of the ZiG in September.
The central bank pointed to increased foreign currency inflows as a contributing factor to the improved stability. Inflows rose by 19.1%, reaching US$11.05 billion in the first 10 months of 2024, compared to US$9.27 billion during the same period in 2023.
Mushayavanhu expressed confidence that inflation would remain stable and return to pre-October levels, supported by these inflows and ongoing monetary policies.
The MPC resolved to maintain its tight monetary policy, which includes: 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%. Enhancing the efficiency of the interbank foreign exchange market.
Mushayavanhu also highlighted that the quarterly corporate tax payments split 50/50 between US dollars and ZiG would bolster foreign currency liquidity in the interbank forex market.
The measures aim to sustain market confidence, stabilize the local currency, and ensure that the economy weathers the challenges posed by the fiscal and monetary imbalances.
Source - newsday
