Economists laud money supply control measures

By Davison Vandira

ECONOMIC analysts have lauded recent measures by the Reserve Bank of Zimbabwe to plug money supply growth, thereby stabilising the exchange rate.

The slow movement of the parallel market rate since the beginning of July has been attributed to the Reserve Bank of Zimbabwe Financial Intelligence Unit’s strict surveillance and freezing of accounts for companies involved in illegal financial transactions.

It is against this background that economic analysts have applauded the suffocation of liquidity on the parallel market as it will bring positive returns to the general public.

If the status quo is sustained, economists believe this will slow down inflation in the coming months and improve the general purchasing power parity in the economy, while demand pull inflation due to growth in broad money will reduce as banks credit creation capacity and speculation tendencies by government suppliers will be crippled.

“It is quite encouraging to note that authorities have realised where the current exchange rate instability has been emanating from and this has been testified by the very slow movement of parallel exchange rate and we just hope and pray that the Financial intelligence Unit will remain on top of the situation,” said Kudakwashe Mugova, an economic analyst.

“There has been a considerable change of fortunes on parallel market rate movements since the beginning of this month since the enhanced monitoring of Financial transactions and it seems authorities have hit the right chords,” said Titus Mukove, an economist.

The central bank has since indicated strict monitoring of financial transactions will continue to ensure compliance with prudential banking regulations as prescribed by Statutory Instrument 205 of 2000.