RBZ CELEBRATES STABILITY IN ZIMBABWE’S EXCHANGE RATE AND INFLATION

The Reserve Bank of Zimbabwe (RBZ) says it has finally brought stability to the exchange rate and inflation. This follows new monetary measures that included injecting about US$150 million into the foreign exchange market. These actions were aimed at stabilizing the economy, which has faced challenges for many years.

The Monetary Policy Committee (MPC) of the RBZ met on December 3, 2024. During the meeting, they talked about how the measures announced earlier in September 2024 had worked. The MPC reported that the actions have reduced liquidity and stopped speculative activities in the foreign exchange market.

The MPC expressed satisfaction with the results. Since October 2024, both the exchange rate and inflation have become more stable. They said the exchange rate premium has gone down. Monthly inflation also dropped significantly, from 37.2% in October 2024 to 11.7% in November 2024.

The high inflation in October was due to a once-off drop in the value of the Zimbabwean dollar (ZiG) against the US dollar in September 2024. However, the MPC believes inflation will stay stable in the coming months. They expect monthly inflation to return to lower levels, similar to before October 2024.

The RBZ also reported an increase in foreign currency inflows. These rose by 19.1%, reaching US$11.05 billion during the first 10 months of 2024. This was an improvement from the US$9.27 billion recorded in the same period in 2023. The RBZ said this increase in foreign currency inflows has helped stabilize the exchange rate.

To keep inflation under control, the MPC said it will maintain its strict monetary policies. These include keeping the bank policy rate at 35%. Statutory reserve requirements for both local and foreign currency deposits will also remain at 15% for savings and time deposits, and at 30% for demand and call deposits.

The RBZ plans to continue improving the interbank foreign exchange market. They noted that a new law passed by the government will help in this regard. This law allows corporate taxes to be paid in a 50/50 mix of US dollars and the Zimbabwean dollar (ZiG). The RBZ believes this will encourage more people to sell foreign currency in the interbank market.

The MPC also announced a new initiative called the Targeted Finance Facility (TFF). This will provide financial support to businesses in a way that ensures the economy keeps growing. The RBZ will work with banks to run the TFF, and details will be shared with the banks soon.

The RBZ promised to keep reviewing its policies based on how the exchange rate and inflation perform. For now, they are confident that their current measures are working and will help bring long-term stability to the economy.

The RBZ’s focus remains on ensuring that inflation expectations are well managed while supporting the productive sector. The MPC said that economic growth is important, and they will balance their efforts to control inflation with the need to help businesses thrive.

This update from the RBZ gives hope to Zimbabweans who have been dealing with economic challenges for a long time. The progress made so far shows that the country is moving in the right direction. However, the MPC’s continued monitoring and adjustments will be key to sustaining this stability in the future.