By Davison Vandira
THE Reserve Bank of Zimbabwe Monetary Policy Committee (MPC) has added impetus to the tight monetary policy stance seeking to tame inflation by raising interest rates to deter speculative borrowing which threatens macro-economic stability.
Inflation has become a global phenomenon where virtually all countries are putting measures to deal with the cancer which in the recent past has been induced by Covid-19 and the geopolitics in Western Europe, hence the latest resolutions by the Monetary Policy Committee.
The Reserve Bank of Zimbabwe (RBZ) is determined to ensure price stability through the tightening of money supply growth.
It is against this background that the 24 June MPC meeting resolved to increase interest rates and all monetary statutory reserves in line with inflation.
“The MPC has reviewed interest rates and statutory reserves with effect from 1st of July 2022 as follows: Increasing the bank policy rate from 80% to 200% per annum Increasing the Medium Term Accommodation interest rate from 50% to 100% per annum;
“Increasing the minimum deposit rate for local currency savings from the current 12.5%; Maintaining the statutory Reserve Requirements at the current levels of 10% for demand and call deposits ad 2.5% for savings and time deposits,” said Dr John Mangudya, Governor of the Reserve Bank of Zimbabwe.
Among other measures pronounced by the MPC to improve economic confidence is the introduction of gold coins into the market to ensure investors have alternative means to preserve value.
“Having noted the widespread use of forward pricing in foreign exchange by some economic agents, the MPC resolved that mechanisms to formalise forward pricing arrangements should be created through the development of a market for forward exchange rates,” said Dr Mangudya.
According to the RBZ, the appropriate exchange rate will be determined at the willing buyer – willing seller mechanism.
The MPC resolutions are being implemented to buttress other measures already in place after concerns on the recent rise in inflation which increased to 30.7% on a month on month basis for June thereby increasing the year on year inflation to 191.6%.
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