‘Monetary policy restores market stability, certainty’

Africa Moyo-Deputy News Editor

In a statement yesterday after a follow-up meeting of the Monetary Policy Committee (MPC) last Friday, Dr Mushayavanhu said the committee deliberated on the recent macroeconomic and financial developments following the announcement of the monetary policy statement on April 5.

One of the major policies brought by the statement was the introduction of the new ZiG (local currency), backed by gold, other precious minerals and foreign currency reserves.

Dr Mushayavanhu said the MPC noted that the monetary policy statement was “well received by the market”.

“In this regard, the MPC affirmed its commitment to the consolidation of these positive sentiments and ensure a quick restoration of confidence, trust and anchoring of inflation expectations. 

Dr Mushayavanhu said considering the initial positive reaction from the market, the MPC has resolved to maintain the current bank policy rate at 20 percent a year and an interest rate corridor of 11 percent to 25 percent to maintain the statutory reserve requirements for demand deposits, with savings in ZiG at 15 percent and time deposits at 5 percent, respectively.

Further, the MPC resolved to maintain the statutory reserve requirements for demand deposits and savings and time deposits in foreign currency at 20 percent and 5 percent respectively. 

He said to support the tight monetary policy stance, the MPC emphasised the need for the Reserve Bank to continue to work closely with the Government for a robust liquidity management system through the joint Liquidity Management Committee to contain money supply growth to the desired levels determined by targeted inflation, growth of the economy and increase in foreign reserves backing the ZiG currency. 

This cooperation would ensure the creation of effective demand for the domestic currency through strict adherence to the multicurrency system by all in the economy, consistent with the multicurrency system except for exempted services.

The RBZ would work closely with the Government to encourage the increased use of ZiG for payment of goods and services to public entities, including the settling of tax obligations on quarterly payments dates. 

“The Reserve Bank was also directed to ensure that, at all times, any growth in reserve money is fully covered by reserves, in the form of gold, other precious minerals and foreign currency balances in the Reserve Bank’s nostro account.”

Overall, the MPC affirmed its strong commitment to fully implement the new monetary policy measures.