By Davison Vandira
THE Reserve Bank of Zimbabwe Governor, Dr. John Mangudya this Wednesday appeared before the parliamentary portfolio committee on budget, finance, and economic development chaired by Chikomba Central legislator, Honourable Felix Mhona, to give oral evidence on monetary policy measures that the central bank is implementing in response to the COVID-19 pandemic.
The central bank governor in his opening remarks acknowledged that the Zimbabwean economy is resilient and suffering from international isolation and that there are four main challenges being faced by the country.
The challenges according to the Governor are low productivity, limited access to foreign currency, high perceived country risk, and negative perceptions.
“Understanding the challenges besetting our economy is critical in coming up with appropriate solutions to our economy,” he said.
“It is within this context that the monetary policy measures that the bank is pursuing are meant to address the major focus areas which are; exchange rate and price stability, smooth functioning of the interbank foreign exchange market and stabilizing the price level by reducing inflation.”
Since 2019, in a bid to rectify these challenges, the central bank has been vigorously pursuing monetary targeting framework to manage the quantity of money in the economy, sourcing foreign lines of credit on behalf of Government in terms of the RBZ Act to keep the economy running as well as managing the foreign exchange rate system which resulted in the introduction of the Reuters trading system to improve efficiency and transparency in the trading of foreign exchange.
The Governor also reiterated to the committee that RBZ has so far achieved several milestones.
“We introduced the Medium Term Bank accommodation facility to provide liquidity to banks which are lending to the productive sectors of the economy, reduction of the Bank policy rate from 70% since November 2019 to promote confidence and minimised Non Performing Loans and recently increased cash withdrawal limits from ZW$300 to ZW$1000 per week.”
As is currently the norm worldwide the central bank has tailor-made its monetary measures to curb COVID-19 through the liberalisation of the use of free funds which include; diaspora remittances, funds remitted by international organisations, embassies, NGO’s and other donations in the economy to allow the public with such funds to pay for goods and services to harness foreign exchange through its free movement as well as to minimize parallel market activities. To date, the policy measure has resulted in an increase in foreign forex in the domestic foreign currency accounts by 35%.
To support all these measures the RBZ’s Financial Intelligence Unit (FIU) has upped its surveillance and monitoring to deal with mobile network agents who are involved in “Ponzi-like” schemes to bring sanity in the Zimbabwean financial system.
Governor Mangudya lays out COVID-19 monetary response
By Davison Vandira