RESERVE Bank of Zimbabwe (RBZ) governor John Mushayavanhu will maintain the bank policy rate at 35% and keep the statutory reserve requirements unchanged to sustain the exchange and inflation rates.
After the ZiG currency had its biggest single-day drop in September to US$1:ZiG24,39 from a prior-day comparative of US$1:ZiG13,99, the market has become volatile.
Further, the 2025 national budget presented last week has raised fears that inflation will soar amid Treasury raising expenditures by a whopping 130,39% from this year.
In the budget, ZiG276,4 billion was set aside for expenditures against expected revenue of ZiG270,3 billion. Meanwhile, the fiscal budget outrun for 2024 is expected at ZiG119,97 billion in expenditure against expected revenue of ZiG110,7 billion.
“The MPC [Monetary Policy Committee] noted that the measures, as intended, have managed to tighten liquidity conditions and curtail speculative activities in the foreign exchange market. In this regard, the MPC noted with satisfaction that the exchange rate and inflation have relatively stabilised since October 2024,” Mushayavanhu said in a statement yesterday following an MPC meeting last Friday.
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“The stability is reflected in the significant narrowing of the exchange rate premium and deceleration of month-on-month inflation from 37,2% in October 2024 to 11,7% in November 2024.
“The spike in month-on-month inflation in October reflected the once-off depreciation of ZiG against the US dollar in September 2024. The MPC also reviewed the impact of the monetary policy measures announced on September 27, 2024.”
Mushayavanhu said inflation was expected to remain stable with monthly inflation moderating to pre-October 2024 levels.
“The stability in the exchange rate will also continue to benefit from foreign currency inflows which increased by 19,1% to US$11,05 billion during the 10 months to October 2024, compared to US$9,27 billion recorded for the same period in 2023,” he said.
Hence, the MPC resolved to maintain the current tight monetary policy stance as follows:
“To maintain the bank policy rate at 35%; To maintain the current statutory reserve requirements for savings and time deposits for both local and foreign currency at 15%; and for demand and call deposits for both local and foreign currency deposits at 30%; To continue deepening and improving the efficiency of the price discovery mechanism of the interbank foreign exchange market.” Mushayavanhu said the payment of quarterly payment dates for corporate tax on a 50/50 US$:ZiG arrangement would increase forex selling on the interbank forex market.
