‘Measures to fight inflation pass effectiveness test’

THE measures put in place to fight inflation and strengthen the local currency have since passed the test of being effective in restoring the credibility of the local currency, especially as a medium of exchange and store of value, economists have said.

Following speculative behaviours in the market, which saw a rise in inflation and prices for basic goods, Government in May introduced macroeconomic policies which were meant to promote the use of local currency and tame inflation.

Among the recent strategic interventions made by the Government to tame volatility in the market are the directive for all import duties to be paid in Zimbabwe dollars except for luxury items; the transfer of external debt obligations from the Reserve Bank of Zimbabwe (RBZ) to Treasury and the introduction of the wholesale foreign currency auction for banks.

The Treasury has also since directed all Government institutions to collect fees and charges in the local currency.

Fifty percent of all US dollar corporate tax payments are now made strictly in local currency while the central bank raised its bank policy rate from 140 percent to 150 percent.

These measures have managed to mop up the excess liquidity in the market resulting in the local currency gaining strength for the past weeks from about UD$1:6 900 to a recent figure of US$1:$4 517 at last week’s forex auction.

The black market has also followed suit as the greenback is now trading at about $6 000 per dollar from as high as $15 000 in May.

Lupane State University Business Clinic development manager Mr George Nhepera said: “For the first time since the introduction of the local currency, we have seen it gaining or appreciating in value, which in my view is a sign of good policy measures being implemented by the monetary authorities.

“Going forward, the money supply should remain under tight control so as to maintain the current momentum, which is key to building business and investor confidence in the country’s prospects for profitability and economic stability.”

He also said the dual payment of civil servants salaries in US dollars and local currency should be maintained on a long-term basis as this is in line with the multiple currency system which the Government adopted.

In a recent meeting held by the Reserve Bank of Zimbabwe (RBZ) Monetary Policy Committee (MPC) to review the effectiveness of the measures put by the Government, the committee expressed satisfaction with the impact of the measures which have stabilised the exchange rate and domestic prices.

Prices and exchange stability has seen annual inflation easing to 101,3 percent in July from 175,8 percent in the previous month.

Therefore, the central bank said it will continue towing its tight monetary policy path that has seen stability in inflation and exchange rate as authorities are confident that economic fundamentals are strong to sustain the current stability as reflected by the robust economic growth of 5,3 percent expected in 2023.

Ms Shynet Chivasa who is an institutional analyst said the measures have brought stability in the exchange rate which is a good move.

She however expressed a worry about some local currency prices which are not responding to stenthening of the local currency.-ebusinessweekly