By Alois Vinga
RESERVE The Bank of Zimbabwe’s (RBZ) Monetary Policy Committee (MPC) has approved resolutions to curb the broad money supply to halt volatility in parallel market exchange rates.
This is in response to questions raised by members during the recent pre-budget consultations.
The moves come shortly after crippling volatility in parallel market exchange rates almost threatened to erode stability gains earlier this month.
In a statement released Thursday evening shortly after the MPC meeting, RBZ Governor John Mangudya announced the resolution to increase the Bank’s key rate from 40% to 60% and the facility’s interest rate. medium-term banking accommodation (MBA) from 30% to 40% with immediate effect.
The initiative is expected to block speculative borrowing which in turn will be used to fuel exchange rate trading in the parallel market.
The measure is expected to result in positive real interest rates, which is essential to foster savings in the economy.
Minimum reserve requirements for sight / sight deposits from 5% to 10%, while maintaining the rate at 2.5% for savings and term deposits and increasing the minimum deposit rates for savings and Zimbabwe dollar term deposits of 5% and 10% per annum at 7.5% and 20%, respectively, to promote the attractiveness of the Zimbabwe dollar as an investment currency.
“The MPC further tightened the reserve currency by reducing quarterly growth in reserve currency targets from 20% to 10% for the fourth quarter of 2021 and the first two quarters of 2022. The decision to revise the growth targets for reserve currency was enlightened by reserve. currency growth rate of 9.3% for the quarter ending September 30, 2021, ”Mangudya said.
The committee refined the bank’s open market operations (OMO) instruments to support optimal liquidity management.
The central bank has since introduced open market operations invoices in an attempt to mop up lazy excess liquidity held in bank accounts that have often been used to fuel parallel market transactions.
In response to concerns expressed by parliamentarians who criticized the bank for selling foreign currency to citizens of urban centers only, a resolution to introduce branches of mobile money changers that will expand into rural communities was passed.
Members of the public will now be allowed to purchase US $ 100 per week instead of the usual US $ 50.
Another measure requested by MPs that will allow pharmacies to access, using the official exchange rate, up to USD 5,000 per month per company to purchase pharmaceuticals from pharmaceutical wholesalers registered in Zimbabwe.
“The MPC praised the favorable performance of the external sector, as evidenced by a 49% increase in foreign exchange earnings, from US $ 4.8 billion received during the same period in 2020 to 7.2 billion US dollars as of October 15, 2021.
“Total foreign payments over the same period in 2021 stood at US $ 5.4 billion, leaving a net surplus position of US $ 1.7 billion represented by foreign currency account balances (FCA) in the banking system, ”Mangudya added.