Monetary policy should enhance financial stability – analysts

AS Reserve Bank of Zimbabwe (RBZ) Governor, Dr John Mangudya prepares to present the 2022 Monetary Policy Statement before the end of this month, economic analysts have stressed the need to ensure sustained stability in financial markets.

Coming at a time when the Government is increasing its focus on implementing the National Development Strategy (NDS1:2021-2025), a stable financial sector is critical in promoting production and development across all sectors of the economy.

In separate interviews, economic analysts said Dr Mangudya should focus more on consolidating public confidence in the local currency and improving efficiency at the weekly Foreign Currency Auction Trading System.

Economist, Mr Peter Mhaka said it was critical for authorities to maintain the gains and achievements the country realised in 2020 so that a positive macro-economic growth trajectory was maintained.

In 2021, Zimbabwe closed the year with a 7,4 economic growth rate and this year, growth is expected to continue at an average 5.5 percent buoyed by a good agricultural season and infrastructural investments expected this year again.

Mr Mhaka said financial markets require clear policies particularly regarding interest rates and a prudent currency management system to promote stability within the sector.

“Businesses are in business to generate profits so the upcoming monetary policy statement should proffer a sound direction in relation to the operation of banks,” he said.

Industrialist Mr Sifelani Jabangwe, who is also the Confederation of Zimbabwe Industries past president, said: “Through policies enunciated in the monetary policy statement, we need to stabilise the exchange rate and there are various issues that authorities need to do; which is allowing a market-determined exchange rate and managing money supply.

“That would help to improve confidence so that the private sector can release more forex on to the market.”
Currently, the local dollar is trailing behind at US$1:Z$108 at the official forex auction platform when compared to about US$1:Z$200 on the parallel market.

Ensuring stable financial markets would, thus, assist the economy to weed out arbitrage opportunities being created by the prevailing distortions emanating from run-away parallel market exchange rate, said Bulawayo businessman and economic commentator Mr Morris Mpala.

“The biggest thing we want, which is a wish for everyone as well as industry, is that once bids are won, the Reserve Bank forex auction system’s turnaround should be as fast as possible,” he said.

“That will try to circumvent the arbitrage from the official vis-à-vis the parallel market.
I think it’s about time now that we expected the rate on the market to be more like tracking the inflationary pressures so that there is less arbitrage between now and the parallel market rate.”-The Chronicle