HARARE – The Reserve Bank of Zimbabwe (RBZ) has reported significant progress in stabilising the economy following the implementation of its monetary policy measures in October 2024.
Both the official and parallel market exchange rates have shown signs of stabilisation, while inflation has declined notably.
In its latest Monetary Policy Committee (MPC) review, the RBZ maintained the benchmark policy rate at 35 percent, reaffirming its commitment to a tight monetary stance aimed at anchoring inflation expectations and ensuring economic stability. However, the central bank also acknowledged the need to balance this approach with support for economic growth.
To address liquidity challenges without undermining its stabilisation efforts, the RBZ announced the introduction of a Targeted Finance Facility (TFF). This facility, accessible through the banking system, will provide flexible funding to businesses in productive sectors, ensuring their operations can continue while adhering to disciplined monetary policies.
Inflation Deceleration and Foreign Currency Inflows
RBZ Governor Dr John Mushayavanhu highlighted the effectiveness of the recent measures, noting a significant decline in inflation.
“The measures we introduced in September have delivered positive outcomes, with monthly inflation decelerating from 37.2 percent in October to 11.7 percent in November,” Dr Mushayavanhu said in a statement.
Robust foreign currency inflows, which increased by 19.1 percent year-on-year to US$11.05 billion as of October 2024, have further bolstered confidence in exchange rate stability. These inflows are expected to maintain the positive economic trajectory in the coming months.
Business Community Welcomes Targeted Financing
The TFF has been widely praised across various sectors. Bankers, industrialists, and analysts view the facility as a critical step in balancing monetary discipline with economic growth.
Prominent banker Raymond Madziva remarked, “This facility strikes the right balance between prudence and progress. It will provide much-needed liquidity to productive enterprises while reinforcing the disciplined monetary framework that has brought inflation under control.”
Industrialist Dr Nxaba Ndiweni echoed similar sentiments, noting its importance for the manufacturing sector.
“Targeted financing is critical to revitalising industries that have struggled with limited access to credit amid tight liquidity conditions. The TFF is a strategic move to ensure that productive enterprises can thrive and drive economic growth,” Dr Ndiweni said.
Economic analyst Namatai Maeresera added a broader perspective, emphasising the TFF’s role in mitigating economic vulnerabilities.
“The introduction of this facility is timely. While maintaining a tight stance is essential for stability, supporting the productive sector ensures long-term resilience,” Maeresera observed.
RBZ Maintains Cautious Optimism
Despite the positive developments, the RBZ remains cautious. The MPC underscored its commitment to closely monitoring inflation and exchange rate dynamics, with an openness to adjust policies as needed.
The statutory reserve requirements were left unchanged at 15 percent for savings and time deposits and 30 percent for demand and call deposits, reflecting the bank’s balanced approach. Furthermore, efforts to enhance the efficiency of the interbank foreign exchange market remain a priority.
The Treasury’s recent tax policy, which allows corporate tax payments in a 50/50 US$:ZiG arrangement, is expected to strengthen the forex market by increasing participation among willing buyers and sellers, thereby anchoring the stability of the Zimbabwean dollar.
A Dual Approach to Economic Recovery
The RBZ’s combination of stabilisation measures and targeted sector support positions Zimbabwe’s economy for a stronger recovery. The continued vigilance of the central bank, coupled with initiatives like the TFF, is expected to fortify the nation’s economic foundation and support sustainable growth.
This dual approach offers hope for a resilient economic outlook, balancing macroeconomic stability with targeted interventions to stimulate productive activity.
