ZIMBABWE CLAIMS TO TAME INFLATION AND STABILIZE EXCHANGE RATE
The Reserve Bank of Zimbabwe (RBZ) says it has brought stability to the exchange rate and inflation. This follows a series of monetary policies aimed at fixing the country’s financial issues. One of the main steps taken was injecting about US$150 million into the foreign exchange market to stabilize the situation.
In a statement, the Monetary Policy Committee (MPC) shared their recent findings and future outlook. The committee met on December 3, 2024, to discuss the economy and review their earlier measures from September 27, 2024. They noted that these actions have tightened money flow and reduced risky activities in the foreign exchange market. This has helped bring stability to the economy.
According to the MPC, the exchange rate and inflation have been stable since October 2024. The gap between exchange rates on different markets has become smaller, and inflation has gone down. Month-on-month inflation dropped from a high 37.2% in October 2024 to 11.7% in November 2024. The MPC said the high inflation in October came from the big drop in the Zimbabwean dollar (ZiG) against the US dollar in September 2024. They expect inflation to continue to drop in the coming months and return to levels seen before October 2024.
The RBZ is optimistic about foreign currency inflows. These 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. This increase is expected to further support the stable exchange rate.
To keep inflation under control, the MPC will stick to its current policies. The measures include:
- Keeping the bank policy rate at 35%.
- Maintaining the statutory reserve requirements for savings and time deposits at 15%. For demand and call deposits, the rate will remain at 30%.
- Improving the interbank foreign exchange market to make it more efficient.
The government recently introduced a law that allows corporate taxes to be paid 50% in US dollars and 50% in ZiG. The MPC believes this will encourage more people to sell foreign currency in the interbank market.
The committee also introduced a new policy to balance the need for tight money flow and support for businesses. This is called the Targeted Finance Facility (TFF). It will be managed through banks, and details will be shared with them soon.
The RBZ plans to keep reviewing its policies to make sure they fit the needs of the economy. The MPC believes that these measures will ensure that Zimbabwe remains on the path to economic stability.
The Reserve Bank’s actions are being watched closely, as they affect businesses and the public. The focus is now on whether inflation and the exchange rate will remain steady in the coming months, as promised by the RBZ.
The success of these policies will be key to rebuilding trust in Zimbabwe’s economy. If they work, the country could see a brighter financial future, but the road ahead still has challenges.