Tight monetary stance to further rein in inflation

By Davison Vandira
THE Reserve Bank of Zimbabwe will next year continue with its tight monetary stance which culminated in the massive reduction of inflation from 400 percent in January to 55 percent this month.
The desire and the priceless economic need to make the Zimbabwean dollar appeal as the currency of choice through low and stable inflation levels has seen the central bank vowing to adopt a tight monetary stance next year.
The year 2022 will mark the second year of The National Development Strategy One which is anchored on inflation stability, hence the central bank is prioritising an efficient and effective price discovery mechanism to manage inflation expectations.
It is against this background that the Reserve Bank of Zimbabwe (RBZ) has committed itself to bring equilibrium between the official and the alternative market through implementing real interest rate regime of around 60 percent on the Zimbabwe dollar to avoid any speculative borrowing to suppress excessive reserve money growth while channeling the money towards productive purposes.
“2021 has been a successful year from the monetary front, it is now incumbent upon the RBZ to implement the lessons learnt this year in as far as achieving inflation stability is concerned and a tight monetary stance will be vigorously pursued for Zimbabwe to achieve its economic objectives in 2022,” said as Economic Analyst Persistence Gwanyanya.
To curtail reserve money supply growth which is a key determinant of inflation, government through treasury and RBZ will improve United States Dollar liquidity into the market to neutralise unnecessary pressure on the local currency.
“Going forward there will be increased USD liquidity into the market to attain a favorable equilibrium position with respect to pressure on the access to foreign currency,” he added.
The general consensus among economists is that inflation stability for Zimbabwe is a confidence booster which is key in the implementation of the National Development Strategy One.

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