RBZ sharpens tools to monitor, evaluate policies

This week, the Reserve Bank of Zimbabwe (RBZ) announced a new initiative to improve the monitoring and evaluation of its monetary policies.

The move comes amid concerns about the effectiveness of past policies and a desire to regain public trust.

The central bank has established a Monetary Policy Implementation, Monitoring and Evaluation Steering Committee (MPIMESCO) tasked with overseeing the impact of its policies.

The committee will employ “best practices” to ensure data quality and credibility, according to RBZ Dr John Mushayavanhu.

Elsewhere in the world, central banks are increasingly recognising the importance of data-driven monetary policies and establishing committees to improve transparency and effectiveness.

The Federal Reserve (USA) has a division dedicated to research and data analysis to inform their monetary policy decisions.

The Bank of England has a Monetary Policy Committee that receives briefings from economists and analysts on the latest economic data.

The European Central Bank also has a research department that provides economic analysis to guide its monetary policy.

By establishing MPIMESCO, the Dr Mushayavanhu said the RBZ was following a global trend of central banks seeking to improve the data-driven nature of their monetary policy decisions.

This could help rebuild trust and public confidence in the bank’s policies effectiveness.

Dr Mushayavanhu said the RBZ was committed to becoming a more transparent and data-driven institution.

He said the MPIMESCO was intended to serve as a central hub for validating data used in policy decisions, monitoring the impact of those decisions and informing the public of the results.

“We will strive to ensure that the information and data from our central bank are of high quality, and credibility; and are compiled and transmitted using best practices so as not to compromise the integrity of our reporting to the market,” Dr Mushayavanhu said in a brief note to employees.

“This is a critical element for ensuring the monetary policy monitoring and evaluation, internally and externally, is effective and of acceptable standards.

“To facilitate this, we have established a Monetary Policy Implementation, Monitoring and Evaluation Steering Committee that will use best practices to effectively monitor and evaluate the impact of our policies.

“The Reserve Bank will strive to be an evidence-based institution – trusted for data integrity and credibility. MPIMESCO, which will establish itself as a reliable hub for data validation in support of policy formulation, impact monitoring, and review, will be the Reserve Bank’s transparency mechanism for informing the public on the impact of policies.”

Some critics, however, say while the creation of MPIMESCO is a positive step in the right direction, its true impact will depend on its independence from political interests.

“The creation of MPIMESCO suggests a recognition of the need for the policy evaluation, something past administrations might have embraced if not for political pressures,” said Tobias Musara, a development economist with a local university.

He, however, said the next election presented a “valuable window” of opportunity.

With about four years until the next vote, the RBZ has a chance to implement reforms with a greater focus on long-term economic health, potentially minimising the influence of short-term political considerations.

The timeframe allows for a more strategic and data-driven approach to policymaking.

“Free from immediate political pressures, the bank can implement these reforms with a focus on long-term economic stability, laying a strong foundation for the future,” said Musara.

Without a “firewall” against political interference, a civil society leader, said the MPIMESCO risks becoming just another tool for vested interests.”

Harare based analyst, Carlos Tadya, concurred saying while the new governor was emphasing the need for reform, some remain skeptical.

“The next four years offer a chance for genuine change, but only if the RBZ prioritises long-term economic health over potential political influence,” said Tadya.

Dr Mushayavanhu said the conditions precedent of attaining policy effectiveness would include identifying and plugging leakages and restructuring the Reserve Bank’s balance sheet from short-term pressures likely to undermine its policies going forward.

Restructuring and reforms

Dr Mushayavanhu acknowledges a loss of confidence in the RBZ’s past policies and intends to address this by identifying and plugging weaknesses that may have undermined previous efforts.

“We are also aware that the market has lost confidence and trust in the credibility and impact of the central bank’s policies over the years and this calls for a focused re-orientation and change in the way we do things in pursuit of our statutory mandate.

“To rebuild our credibility and relevance, we must acknowledge that this is not “business as usual” and undertake personal transformation as well as develop a new “RBZ brand” to win
back public confidence in the central bank.

“It is expected of all of us to adjust to accept this “paradigm shift” of a new work culture that will ingrain in us.”

New approach

Dr Mushayavanhu said central bank would focus on the need for a significant change in its approach, calling it a “paradigm shift” and acknowledge it will require personal transformation to cultivate a new culture of operational effectiveness and excellence. This cultural shift is seen as crucial to regaining public trust and ensuring the success of future policies.

Public confidence in the RBZ has been severely shaken, with the roots of this distrust reaching back to the devastating hyperinflation of 2008.

Witnessing the Zimbabwean dollar lose all value was a deeply traumatic experience for many citizens.

The RBZ’s perceived inability to control inflation destroyed trust in its ability to manage the nation’s monetary policy.

People who had saved in Zimbabwean dollars saw their life savings become worthless.

This instilled a deep sense of financial insecurity.

Even after the reintroduction of the Zimbabwean dollar in 2019, its rapid decline in value triggered memories of the hyperinflation era.

People became reluctant to hold onto the local currency, further undermining its credibility.

Throughout the crises, a perception of secrecy surrounding the RBZ’s decisions has persisted. People felt a lack of explanation for policies that caused such hardship, creating suspicion and resentment.

The continued widespread use of the US dollar for daily transactions also signifies a lack of faith in the RBZ’s ability to manage a stable local currency.

The 2008 hyperinflation marked a turning point, and the subsequent years of economic instability have only deepened the public’s mistrust in the RBZ.

“Regaining public confidence will require a long-term commitment to transparency, effective policies that demonstrably improve economic conditions, and a clear path towards a stable and reliable Zimbabwean dollar,’” said Tadya.

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