By Alois Vinga
THE Reserve Bank of Zimbabwe (RBZ) latest Monetary Policy Statement Thursday projected monthly inflation levels to decline to between 3 to 10 % by year end amid the consolidation of economic stability measures adopted earlier.
Delivered by the RBZ governor John Mangudya under the theme “Restoring Price and Exchange Rate Stability” the Mid Term Monetary Policy Statement was premised on the need to reduce inflation to sustainable margins by pursuing a tight monetary policy path which will see minimum capital requirements for all categories of banks being maintained at the current levels ahead of the December 31 2022 deadline.
The minimum threshold stands at US$30 million or its equivalent in foreign currency.
The central bank however committed to give a listening ear to those institutions facing difficulties in meeting the thresholds.
The current bank policy rate of 200% was maintained but subject to reviews on the back inflationary developments, a discretion which will also be applied on the Medium Term Accommodation rate.
Rates on savings and time deposits were maintained at 40% and 80% per annum with possibility of shifts determined by inflation developments.
“Foreign currency denominated loans which now constitute more than 50% of the total loans in the economy will be subject to statutory reserve requirements at rates of 5% for call deposits and 2,5% for time and savings deposits with effect from September 1 2022,” reads the statement.
“The differential system is to encourage 55 banks to promote savings deposits that are necessary to support long term productive lending in foreign currency.”
The foreign exchange retention thresholds shall continue at the current levels with agricultural exporters of tobacco, cotton, tea, coffee and horticulture retaining 75% and the tourism sector retaining 100% to enable the ongoing capitalisation and recovery of the sector to continue following the adverse effects of the Covid-19 pandemic.
The bank also moved to allow Bureaux de Change to increase transaction limits from US$500 per week to US$5,000 per transaction per month for foreign currency payments that include medical expenses, educational expenses including student upkeep, business and holiday travel, airfares and subscriptions.
The MPS hailed the recent move by the government to improve its procurement processes by ensuring that suppliers of goods and services to the government do not destabilize the foreign exchange market through forward pricing, saying such a mechanism will go a long way in easing inflationary pressures.
The blueprint also committed to introduce lowered value of gold coins by mid-November 2022 in a bid to improve investment access to everyone.
“The recent positive developments in the parallel market foreign exchange premiums and the decline in monthly inflation suggest that the current monetary policy stance should be maintained.
“The Bank will, therefore, continuously review its monetary policy toolkit in line with monthly inflation developments,” added Mangudya.