THE Reserve Bank of Zimbabwe (RBZ) has increased withdrawal limits to $2 000 from $1 000 and reviewed upwards the bank policy and private sector lending rates as part of comprehensive measures to strengthen price and financial sector stability.
The increase in withdrawal limits is expected to ease cash shortages and will be buttressed by introduction of new $50 bank notes.
This will enhance consumer convenience when transacting in cash while the bulk of transactions are conducted through electronic banking.
RBZ Governor, Dr John Mangudya (pictured), unveiled the new interventions yesterday in his 2021 Monetary Policy Statement, which builds on the gains achieved in the previous policy interventions.
In order to keep money supply growth in check and maintain stability, the bank policy rate for overnight accommodation has been moved to 40 percent per annum from 35 percent while the mid-term lending rate to productive sectors is now 30 percent from 25 percent.
The decision on interest rates takes into account the current liquidity conditions in the market and the need to continue controlling speculative borrowing, said Dr Mangudya.
He stated that mobile money transactions would remain capped at $5 000 per day and $35 000 weekly in order to curb the abuse of the platform, which was historically being manipulated by illegal money dealers for speculative purposes. The measures are with immediate effect.
Given the anticipated bumper harvest due to a favourable agriculture season, the apex bank expects inflationary pressures to remain subdued in the short to medium term, with an ambitious annual inflation target of below 10 percent set for 2021 from 262,6 percent in 2020.
As the country gets down to implementing the National Development Strategy (NDS1:2021-2025), as a building bloc towards realisation of an upper middle-income economy by 2030, a stable financial services sector is crucial to creating a supportive macro-economic environment.
Anchored on the theme: “Staying on course in fostering price and financial system stability”, Dr Mangudya said the 2021 Monetary Policy Statement was expected to support the attainment of the projected positive economic growth targets in line with this year’s National Budget estimates.
“The measures presented in this statement are expected to support the attainment of the envisaged economic growth of 7,4 percent in 2021 and to control inflation to below 10 percent by end of December 2021,” said Dr Mangudya.
“This inflation path will be underpinned by a targeted month-on-month inflation rate of below three percent.”
As such, the Governor said the bank’s focus on fostering price and financial system stability in the economy requires team effort, as he called on all Zimbabweans to enhance self-discipline and compliance while cherishing economic progress.
“Thus, sustaining the current economic stability that was brought about by the conservative monetary targeting framework, the auction system, fiscal discipline and efficacy in the mobile banking system is paramount and needs to be preserved, safeguarded and sustained,” he said.
Dr Mangudya allayed fears that the imminent introduction of new $50 bank notes would increase inflation in the economy since “they do not increase money supply”, adding that authorities were keeping a firm control on supply growth through conservative or hawkish monetary targeting framework.
In order to ensure sustainability of the forex auction system, which was introduced last year in June, Dr Mangudya said a 40 percent export surrender requirement, 20 percent domestic foreign exchange sales proceeds surrender requirement and 15 percent foreign exchange contribution from the fiscus, will be adopted.
“Maintaining the foreign exchange auction system remains paramount in anchoring inflation and maintaining price and financial system stability,” he said.
“The bank shall continue refining the foreign exchange auction system taking into account market fundamentals as well as closely monitoring the utilisation of funds from the foreign exchange auction system and the economy at large.”
Despite the disruptive impact of Covid-19, Dr Mangudya said overall, Zimbabwe’s economy was poised for strong growth in the short to medium term, buttressed by the resilience and hard-work exhibited in different productive sectors.