RBZ targets price stability and tight exchange rate controls

By ZBC Reporter
THE Reserve Bank of Zimbabwe Governor, Dr. John Mangudya has said the central bank’s focus this year is on confidence-building measures to contain inflation and stabilise the exchange rate by managing money supply in the country.
Presenting the 2020 monetary policy in Harare this Monday, the Central Bank Governor said the economy has managed to achieve a sustained decline in the month on month inflation since October 2019 and relative stability in the exchange rate.
“Consistent with the Bank’s policy thrust of ensuring exchange rate and price stability, the economy managed to achieve a sustained decline in month-on-month inflation since October 2019 and relative stability in the exchange rate. This trend is consistent with the positive macroeconomic outlook for the country which is set to grow by around 3% in 2020. Month-on- Month inflation is expected to be well below 5% by year-end.
The Bank is committed to ensuring that the above fundamentals are achieved through the Bank’s use of monetary targeting framework to achieve price stability whilst at the same time addressing the emerging challenge of depressed aggregate demand. Focusing on confidence-building through effective communication by the Bank has also become very important in view of the fact that key factors that cause inflation in Zimbabwe are people’s expectations of future inflation.
“These non-monetary factors are grounded on the public’s past negative experiences with inflation. In addition, the Bank is committed to improving the depth and efficiency of the interbank foreign exchange market with a view to enhancing its efficacy and thus ensuring a credible, predictable and sustainable exchange rate determination framework. This will produce stability and enhance confidence in the foreign currency market,” said Dr. Mangudya.
He also said Zimbabwe is on the right trajectory to de-dollarise following a drop in foreign currency deposits against a rise in the use of the local currency.
“The process is a transitional one but we are really confident of achieving our intended targets,” he said.
Some of the key highlights of the 2020 monetary policy include month on a month inflation target of below five percent, rise in bank deposits to over 35 billion dollars, 200 entities dominating 50 percent of Zimbabwe’s bank accounts, more injection of money in the economy and lending rates of 35 percent per year.