The Reserve Bank of Zimbabwe’s (RBZ) Monetary Policy Committee (MPC) has decided to maintain the Bank Policy rate at 35%. Similarly, the statutory reserve requirements for both savings and time deposits, in local and foreign currencies, will remain at 15%.
In a statement released on Tuesday, December 3, following the MPC’s meeting, central bank governor John Mushayavanhu also announced the upcoming introduction of a “Targeted Finance Facility.” The operational details of this facility will be shared with banks in due course.
The MPC met to discuss recent macroeconomic trends and the outlook, as well as to evaluate the effectiveness of the monetary policy measures announced on September 27, 2024. The committee reported that these measures have successfully tightened liquidity and reduced speculative activities in the foreign exchange market.
As a result, there has been notable stability in both the exchange rate and inflation since October 2024. The exchange rate premium has narrowed significantly, and month-on-month inflation has decreased from 37.2% in October to 11.7% in November.
The surge in inflation during October was attributed to a one-off depreciation of the Zimbabwean dollar against the US dollar in September 2024. Moving forward, the MPC expects inflation to remain stable, with monthly inflation returning to pre-October 2024 levels.
The stability in the exchange rate is further supported by a 19.1% increase in foreign currency inflows, reaching US$11.05 billion for the first ten months of 2024, compared to US$9.27 billion in the same period in 2023.
To maintain inflation control, the MPC has resolved to continue its current tight monetary policy stance, including:
- Keeping the Bank Policy rate at 35%.
- Maintaining statutory reserve requirements for savings and time deposits (both local and foreign currency) at 15%, and for demand and call deposits at 30%.
- Continuing efforts to enhance the price discovery mechanism in the interbank foreign exchange market.
The recent legal change allowing for the payment of corporate tax in a 50/50 US$:ZiG arrangement is expected to increase the availability of foreign currency in the interbank market.
To support the productive sector while managing tight liquidity conditions, the MPC has decided to introduce a Targeted Finance Facility (TFF), which will be administered through the banking system. Details regarding its operation will be provided to banks in due course.
The MPC will continue to monitor the economic situation and adjust its policy stance as necessary based on developments in exchange rates and inflation.
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