By Alois Vinga
RESERVE Bank of Zimbabwe’s (RBZ) first Monetary Policy Statement (MPS) for the year 2022 has targeted to deal with excess cash, inflation reduction and stabilising the local currency.
Delivered by the RBZ governor John Mangudya Monday under the theme, “Stay on Course”, the MPS bank reviewed downwards the quarter-on-quarter reserve money target from 10% to 7,5% for the quarters ending March and June 2022, which target will be reviewed thereafter.
The measure is aimed at mopping up excess cash which the authorities have since blamed for fuelling exchange rate depreciation on the parallel market and speculatively increasing inflation.
“The revised quarterly reserve money growth target is consistent with the envisaged economic growth rate of 5.5% in 2022 and the expected year-end inflation of 25-35 %,” said Mangudya.
RBZ has also tabled plans to aggressively manage liquidity through maintaining Open Market Operations (OMOs) to liquidity injections by Government to avoid excess liquidity in the banking system emanating mainly from payments for infrastructural development projects.
In a move aimed at promoting borrowing to boost productivity, the policy rate, which is the rate at which the central bank is willing to lend money to commercial banks, was maintained at the current levels of 60% and 40%, respectively.
Throuh it, the central bank influences short-term interest rates and the money supply in the economy, the rate at which the central bank is willing to lend money to commercial banks.
New measures to tighten the screws on the Reserve Bank of Zimbabwe (RBZ) Foreign Exchange Auction system were put in place.
“There will be strict adherence to and enforcement of the Know Your Customer (KYC) and Customer Due Diligence (CDD) principles and requirements by banks when processing forex bids and intra-bank transfers on behalf of their customers.
“Measures are in place to ensure timeous settlement of auction bid allotments within a period of two weeks and allotment of foreign currency on the basis of available foreign exchange to avoid incidences of settlement backlogs,” said Mangudya.
The bank also moved to encourage the wider use of the Zim dollar by increasing foreign exchange availability to fuel service stations designated by the Zimbabwe Energy Regulatory Authority (ZERA) to sell fuel in local currency.
Deposit rates for savings and time deposits were maintained at 10% and 20% , respectively, to preserve value for local currency deposits amid plans to build foreign exchange reserves to provide the necessary back-up support for the local currency through setting aside 5% of the foreign exchange available for the auction system.