RBZ measures hailed for restoring stability
MONETARY policy statement (MPS) measures announced by the Reserve Bank of Zimbabwe in April this year have stabilised the economy and restored sanity to the country’s stock market, according to FBC Securities’ monthly snapshot.
New central bank governor Dr John Mushayavanhu delivered the 2024 MPS shortly after taking over the reins at the apex bank. The new measures included the new structured currency, Zimbabwe Gold (ZiG). The central bank also introduced a floating exchange rate system, precious metals, and forex-backed domestic currency and maintained a tight monetary policy framework, among other interventions.
Before the new measures, Zimbabwe had for a long time been grappling against exchange rate volatility, which drove inflation and destablised the domestic economy.
“The policy managed to stabilise inflation and exchange rates. Of note, however, is the continuation of a tight monetary policy, which is limiting the availability of local currency and suppressing the activity in the capital markets,” FBC Securities said.
However, the securities firm believes that the headwinds will likely persist throughout 2024 given the depressed activity in primary sectors, falling global commodity prices, and increased cost of living.
“We expect dampened bottom-of-the-pyramid liquidity leading to reduced consumer spending and weaker toplines. This will be exacerbated by the low agricultural yield this year caused by the El-Nino-induced drought affecting Zimbabwe and other Southern African countries,” they said.
On the investments front, in May the Zimbabwe Stock Exchange (ZSE) was generally active and firm, with the benchmark All Share Index (ASI) rising by 1,4 percent from 98,83 on April 30, 2024, to close the month of May at 102,14.
Local currency-denominated ZSE’s ASI, Top 10 index, and market capitalisation recorded marginal gains of 2,14 percent, 4,14 percent, and 3,29 percent respectively.
As a result, the market capitalisation closed the month at $29,4 billion, up 2,8 percent from the April 30, 2024, level of $28,6 billion.
On the US dollar based Victoria Falls Stock Exchange (VFEX), the All-Share Index marginally decreased from 99,61 on April 30, 2024, to close the month of May at 95,73, a 3,9 percent loss.
The market capitalisation similarly lost 3,9 percent, from US$1,2 billion to US$1,17 billion, over the same period. FBC Securities believes that given the market’s preference to hold US dollars chiefly as a store of value rather than a medium of exchange, its flow to the capital markets will remain constrained, and a flat sentiment is expected.
“The recent launch of a new product, Contract for Differences (CFDs), which will be traded on the VFEX, is expected to deepen the USD-denominated market, catalyse activity, and grow its liquidity.”
Economist Tinevimbo Shava commended the governor of the Reserve Bank of Zimbabwe (RBZ) for the prudent monetary policies that have contributed to the current stability.
“The governor has demonstrated a strong commitment to stabilising the economy through effective monetary measures,” Mr Shava said.
“The introduction of a new structured currency and the extension of the multi-currency system to 2030 are significant steps that have not only stabilised inflation and exchange rates but also instilled confidence in the financial system,” he added.-herald
