World Bank Endorses Zim Economic Remedies

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By Alois Vinga

GLOBAL financier, World Bank (WB) has credited Zimbabwe’s monetary authorities for implementing sound exchange rate policies that have led to relative stability on the local currency.

Since 2018, the government has been implementing a raft of measures aimed at stabilising the economy.

In June 2020, the Reserve Bank of Zimbabwe (RBZ) introduced the Foreign Exchange Auction platform alongside other cutthroat measures which were meant to tame a volatile exchange system.

These involved plugging leakages within the country’s mobile money transfer sector.

Yearly inflation rates have since fallen from a high of 837 % to the current 194 % as at April 30, 2021 amid the slowdown of the Zim-dollar depreciation on both the parallel and official exchange rate markets.

Against this background, the latest WB report titled: Zimbabwe Economic Update: Overcoming economic challenges and the pandemic, hailed government’s efforts in stabilising the economy.

“The government’s efforts to stabilise prices through prudent fiscal policy and rules-based monetary and exchange rate policies have been effective and must be continued to enhance confidence and improve macroeconomic conditions,” said the global financier.

WB believes that ensuring macroeconomic stability will be a strong basis for supporting a private-sector-led economic recovery and easing social conditions.

The World Bank suggested that on the fiscal side, in addition to measures aimed at improving revenue collection, stringent fiscal policies are required to reduce distortive spending and redirect resources where they were most needed, including to ensure delivery of basic social services and re-establishing human capital.

“Maintaining price and exchange rate stability will require the RBZ to limit the growth of monetary supply, primarily by avoiding monetary financing and all quasi-fiscal activities, while ensuring high transparency and accountability of monetary policy,” the report said.

The study also called for the implementation of key policy reforms outlined in the recently approved National Development Strategy (NDS) as key priority.

The bank said the best case scenario going forward, will be the acceleration of economic reforms and reengagement with international development partners with growth expected to reach four to five percent in 2021, inflation returning to single digits in 2022, and poverty reduction accelerating.