Zimbabwean Central Bank warns of ripple effects of Ukranian-Russia war

- A convoy of Russian armored vehicles moves along a highway in Crimea, Tuesday, Jan. 18, 2022. With tens of thousands of Russian troops positioned near Ukraine, the Kremlin has kept the U.S. and its allies guessing about its next moves in the worst Russia-West security crisis since the Cold War. (AP P
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HARARE – The Reserve Bank of Zimbabwe (RBZ) Monetary Policy Committee (MPC) has warned that the ongoing armed conflict between Russia and Ukraine will have a knock-on effect on prices of goods and services locally.

Russia launched a full-scale invasion into Ukraine on February 24 and to date over 1,2 million people have fled the country.

Market watchers say the war is putting at risk global supplies of products like platinum, aluminium, sunflower oil, wheat and steel. It is already shuttering factories in Europe, Ukraine and Russia and has sent energy prices further up.

The RBZ committee said Zimbabwe may not be spared by the developments.

“The current global dynamics, including disturbances in Ukraine, were expected to result in spill-over effects on domestic prices. Such global developments include increases in the international prices of oil, gas, fertiliser and cooking crude oil, products of which Russia and Ukraine are major producers,” RBZ governor John Mangudya said.

The United Nations database on international trade, COMTRADE states that in 2020 alone, Zimbabwe imported goods worth US$12,46 million from Russia which include fertilisers, medical apparatus among other products.

In the same period, the database says Zimbabwe imported products worth US$14,21 million from Ukraine which include food and industrial products.

The two countries present a total US$26,46 import market, initially disturbed by the Covid19 effects, the current invasion has already resulted in flights cancellations, voyage rerouting which will eventually be felt the world over.

Meanwhile, the MPC engagement noted that the parallel market exchange rate had stabilised since the beginning of February 2022 and made deliberations focused on ensuring that the exchange rate remained well anchored and that current short term exogenous inflation pressures from the global economy and administrative prices would not be transmitted into domestic inflation.

The MPC resolved to maintain the Bank policy rate at 60% and the Medium-Term Bank Accommodation (MBA) Facility interest rate at 40%.

The statutory reserve requirements for demand/call deposits were maintained at 10% and at 2.5% for savings and time deposits, respectively with money growth targets being set at 7,5% for the first and second quarters of 2022.

“The MPC also agreed to ensure continued synchronisation of the government payments and market liquidity positions in order to foster strong adherence to quarterly reserve money targets and manage inflation expectations among other measures,” added Mangudya.