The Reserve Bank of Zimbabwe (RBZ) today released a statement outlining the deliberations of its Monetary Policy Committee. The document outlines the strides that the Reserve Bank has noted in the economy but also included mention of the RBZ working on securing USD deposits via the Deposit Protection Corporation (DPC).
The full statement by the RBZ’s Monetary Policy Committe reads as follows:
The Monetary Policy Committee (the Committee) of the Reserve Bank of Zimbabwe (the Bank) met on the 28th of June 2021 and deliberated on recent economic and financial development and their implications on monetary policy.
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The Committee noted with satisfaction the current macroeconomic stability and the strong positive growth trajectory that is underway, a position which has also been confirmed by the International Monetary Fund, the World Bank and the African Development Bank.
The Committee is pleased with the current disinflationary trajectory which has seen annual inflation further falling from 161.9% in May to 106.6% in June 2021. The Bank expects annual inflation to decline to 55% by end July 2021 and to below 25% by December 2021.
Against this background the Committee made the following resolutions to sustain the current inflation trajectory and support the envisaged robust economic growth for 2021 and beyond:-
a. Maintaining the Bank policy rate at 40% and the interest rate on the Medium Term Accommodation Facility at 30% per annum;
b. Further tightening monetary policy by reducing the reserve money growth target from 22.5% per quarter to 20% per quarter going forward, while continuing to review the reserve money growth target to achieve and maintain stability of inflation and the exchange rate in line with developments in other macroeconomic fundamentals; and
c. Streamlining the Foreign Currency Auction System to reflect macroeconomic fundamentals and ensuring that the country’s productive sector is given priority in terms of allotment.
The Committee is also pleased to note the continued increase in foreign currency deposits in the banking system, which currently stand at US$1.3 billion. The Bank, in consultation with the Deposit Protection Board, is exploring mechanisms to protect foreign currency deposits. Consultations are also ongoing to encourage banks to leverage on the foreign currency deposits to enhance financial intermediation for the benefit of the economy.Reserve Bank of Zimbabwe (RBZ)
As we reported earlier this month there were no assurances that you could get your USD deposits back in the event that a bank goes belly up. This glaring hole in policy is made worse when we have had over a decade of using the USD and other currencies as legal tender in Zimbabwe.
The statement by the RBZ mirrors the response that we got from the Deposit Protection Corporation (DPC) and to be honest its a relief that they are finally addressing this.
Too little too late
As with the issue of interest rates for deposits that the RBZ announced recently. This move has come a little late to revert the mistrust people have with the financial system. Furthermore, the lack of protections for USD deposits might just be one of many yet to be discovered flaws in the financial system.
My colleague last week (in an episode of our podcast) highlighted that the policies we have across the board need reviewing because some of them were set a very long time ago. Things have changed and policies that were drafted ages ago need immediate reviewing. If the RBZ and Ministry of Finance take the course of action they could begin to build trust with the public and this could possibly lead to the beginning of the disbandment of the National Mattress Bankers Association.
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Another area that the RBZ needs to look at is its reluctance to tinker with cryptocurrencies. Zimbabwe is a unique case because we have adopted mobile money en masse. This means that the learning curve for cryptocurrencies like Bitcoin is a lot shallower than in other countries. Cryptos could also help us shed our dependency on the USD keeping money in the system rather than under mattresses.
We were joined by Prosper Mwedzi, a Financial Services Lawyer and Blockchain Technology Analyst to talk about just how much cryptos could help Zimbabwe and how we are being left behind by the govt’s distaste for them.
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