RBZ keeps bank, statutory reserve rates unchanged

The Reserve Bank of Zimbabwe (RBZ) has maintained its benchmark policy rate at 35 percent, continuing its tight monetary policy stance to anchor inflation expectations and stabilise the economy.

But realising the potential impact of a tight monetary policy stance on economic growth, the bank said it will establish a facility from which businesses can borrow at flexible terms to support operations.

RBZ Governor Dr John Mushayavanhu, in a statement after the Monetary Policy Committee (MPC)’s latest decisions , highlighted the progress achieved in curbing speculative activities and stabilising the exchange rate and 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 stated.

The MPC’s commitment to managing liquidity and ensuring economic stability is further supported by robust foreign currency inflows, which grew 19,1 percent year-on-year to US$11,05 billion as of October 2024.

The inflows underpin expectations for continued exchange rate stability and improved economic outlook in the months ahead.

To complement its current hawkish policy stance, the RBZ has launched a new Targeted Finance Facility (TFF) to assist businesses in need of funding.

This initiative, administered through the banking system, is designed to provide tailored support to productive sectors while preserving the overarching objective of tight monetary control.

Dr Mushayavanhu emphasised that the TFF reflected the bank’s commitment to fostering growth without compromising the gains made in stabilising the macroeconomic environment.

The TFF has received a warm reception across various sectors of the economy, with stakeholders lauding its potential to balance monetary discipline with growth imperatives.

Raymond Madziva, a prominent banker, expressed optimism about the initiative.

“This facility strikes the right balance between prudence and progress. Hope is it will provide much-needed liquidity to productive enterprises while reinforcing the disciplined monetary framework that has brought inflation under control,” he said.

Industrialist Dr Nxaba Ndiweni welcomed the facility as a lifeline for the manufacturing sector.

“Targeted financing is critical to revitalizing 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 provided a broader perspective, emphasising the TFF’s significance in mitigating economic shocks.

“The introduction of this facility is timely. It reflects the central bank’s understanding of the nuanced needs of the economy. While maintaining a tight stance is essential for stability, supporting the productive sector ensures long-term resilience,” Mr Maeresera remarked.

Despite the optimistic tone, the RBZ remains cautious. The MPC reaffirmed its resolve to closely monitor developments in inflation and the exchange rate, adjusting its policy stance as needed.

“Our goal is to sustain these gains and ensure that inflation expectations remain well-anchored,” Dr Mushayavanhu explained.

The decision to maintain statutory reserve requirements at their current levels of 15 percent for savings and time deposits and 30 percent for demand and call deposits, further reflects this balanced approach.

Additionally, the bank reiterated its commitment to enhancing the efficiency of the interbank foreign exchange market.

It also noted that the Treasury’s new tax law allowing corporate tax payments in a 50/50 US$: ZiG arrangement, would increase the number of willing buyers and willing sellers in the forex market and help anchor the stability of ZiG.

As Zimbabwe navigates its recovery, the TFF and the continued stabilisation measures position the economy to benefit from both macroeconomic discipline and sector-specific support.

This dual approach, coupled with vigilant oversight, is expected to fortify the nation’s economic foundation.

-herald