Monetary measures spur exchange rate stability: RBZ

John Mangudya

THE Reserve Bank of Zimbabwe (RBZ) says the tight monetary policy implemented by the bank resulted in the exchange rate stabilising and inflationary pressures easing.

In a statement, RBZ governor John Mangudya said the Monetary Policy Committee had noted the positive impact of various measures by monetary and fiscal authorities to reduce inflationary pressures and stabilise the exchange rate when it met last week.

“The Monetary Policy Committee (MPC) of the Reserve Bank of Zimbabwe (the bank) met on 26 August 2022 to review the impact of the recent monetary policy measures on the economy. The MPC noted with satisfaction that a combination of the tight monetary policy stance, favourable uptake of gold coins, effective monitoring and enforcement of market discipline by the Financial Intelligence Unit and the review and enhancement by government of its procurement processes and practices to ensure value for money had resulted in the stability of the exchange rate and a decline in inflationary pressures,” he said.

RBZ released the first batch of Mosi-Oa-Tunya gold coins onto the market on July 25 this year as an option to store value amid massive depreciation of the Zimbabwe dollar.

The gold coins have liquid asset status, prescribed asset status, can be used as collateral, tradable and can be bought at the instance of the holder.

Mangudya said a total of 6 799 gold coins had been sold, with 75% bought by corporates, while 25% were purchased by individuals.

“As at 26 August 2022, a cumulative total of 10 000 gold coins had been minted and out of which 8076 gold coins had been distributed to the bank’s agents for sale. A total of 6799 gold coins had been sold as at 26 August 2022, with 75% having been bought by corporates and 25% by individuals,” Mangudya revealed.

“Ninety-five percent of the gold coins sold were purchased in the local currency and the balance in foreign currency.”

The MPC, he said, had resolved to maintain the tight monetary policy stance while ensuring adequate support to the productive sectors of the economy, in particular primary agriculture, agro-processing and small and medium enterprises. This, Mangudya said, would be done by maintaining the bank policy rate at 200% per annum and maintaining the medium term accommodation interest rate at 100% per annum.

He said the MPC noted the decline in month-on-month inflation from 25,6% in July 2022 to 12,4% in August 2022.

Mangudya said month-on-month inflation was expected to decline, while annual inflation was expected to continue rising and reach an annual peak in September 2022 due to a lower base effect in 2021.

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