HARARE – The Reserve Bank of Zimbabwe (RBZ) has assured the public that bonus payments to civil servants and other stakeholders will not destabilise the exchange rate or prices during the festive season.
Speaking to The Sunday Mail, RBZ Governor Dr John Mushayavanhu said recent policy measures, coupled with the payment of bonuses in US dollars and Zimbabwe Gold (ZiG), will help maintain economic stability.
Stabilising the Exchange Rate
Both the official and parallel market exchange rates have stabilised following measures aimed at reducing excess liquidity and speculative demand for foreign currency. Dr Mushayavanhu noted that since the Government budgeted for civil service bonuses, their impact on exchange rates and prices would be minimal.
“With bonuses being paid in both US dollars and ZiG, with a larger portion in hard currency, the effect on the exchange rate should be limited,” he said. “Substantial revenue inflows from the fourth quarter quarterly payment dates (QPDs) will further support stability.”
Festive Season Economic Activity
Dr Mushayavanhu highlighted that the festive season typically sees a rise in economic activity and consumption. Discounts offered by retailers and an increase in diaspora remittances as Zimbabweans return home are expected to sustain demand without significant inflationary pressures.
“The net effect on exchange rates and prices is likely to be minimal,” he said.
Policy Measures Driving Stability
The RBZ’s tight monetary policy has been instrumental in stabilising the economy. Recent measures include:
- Raising the bank policy rate from 20% to 35%.
- Increasing statutory reserves to 30%.
- Enhancing flexibility in the foreign exchange interbank market.
“These actions have reduced excess liquidity and curbed speculative foreign currency demand, leading to a narrowing of the parallel market premium,” said Dr Mushayavanhu.
Additionally, the willing-buyer, willing-seller interbank market has responded positively, improving foreign currency supply and contributing to price and currency stability.
Coordinated Liquidity Management
The Liquidity Management Committee (LMC), comprising representatives from the RBZ and Treasury, has been meeting regularly to oversee liquidity levels and mitigate risks to price and exchange rate stability.
To bolster these efforts, the RBZ has re-established the Open Market Operations Committee, which also convenes regularly to manage economic liquidity.
“The operations of these committees have been key in sustaining the prevailing stability in prices and foreign exchange markets,” Dr Mushayavanhu said.
Strengthened Reserves
The country’s total reserves, including gold, now stand at approximately US$540 million, significantly exceeding reserve money at ZiG4 billion (equivalent to US$155 million). This translates to a reserve cover of more than three times, up from US$285 million when ZiG was introduced in April.
With total foreign reserves surpassing total deposits in the banking sector, Dr Mushayavanhu reaffirmed that Zimbabwe is well-positioned to maintain economic stability through the festive season and beyond.