Zimbabwe Central Bank Statement

Author: IFLR Correspondent | Published: 24 Sep 2019
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The Zimbabwean economy is in a transition phase that is expected to culminate in the country overcoming its economic difficulties and becoming an upper middle income economy by 2030. The transition to a market-based economy is supported by policy measures under the government's Transitional Stabilisation Programme.

To support the government's economic aspirations, the Reserve Bank of Zimbabwe (the Bank) has liberalised the foreign currency market through the introduction of the interbank foreign exchange market, which trades on a 'willing-seller, willing-buyer' principle. This is expected to go a long way in enhancing the country's competitiveness and removing distortions in both the product and foreign exchange markets. The Bank has also re-introduced the Zimbabwean dollar, which has been embraced as the official settlement and unit of account for all transactions in the economy.

Most importantly, the re-instatement of an independent monetary policy and its toolkit, as well as an exchange rate, means that Zimbabwe now has the fiscal and monetary policy tools to stimulate growth and development and achieve an upper middle income status goal by 2030. These policies are being complemented by structural policies pursued by the government.

The Bank is also aggressively promoting the use of fintech, which has significantly transformed the country's economic and financial landscape. About 86% of retail transactions in Zimbabwe are conducted through electronic means of payment as opposed to cash. Furthermore, banks and other financial institutions, either on their own or in partnerships with fintech companies, are embracing digital financial transformation and adjusting the way they organise business and provide services to the banking public. Notable innovative services include mobile money, money switching services and electronic platforms such as Zimswitch, Payserv and Paynow. The Bank has put in place a Fintech Working Group, to oversee and give guidance on fintech issues.

The Bank has been pursuing various confidence building measures to anchor inflation expectations. It has demonstrated its commitment to lower inflation by adopting a tight monetary targeting framework. The envisaged endgame of this framework is for the Bank to migrate to a full-fledged inflation targeting framework, in line with its mandate to maintain price and financial stability.

The fiscal consolidation measures adopted by the government and reinforced by a tight monetary policy stance are helping to contain inflationary pressures, as attested to by a declining trend in month-on-month inflation since October 2018. The country anticipates further dampening of inflationary pressures to lead to a sustainable inflation level by December 2020. To strengthen the stability and resilience of the financial system, the Bank has also adopted a macroprudential policy framework. The framework provides for effective and appropriate macroprudential tools, governance, transparency and accountability arrangements that will help to identify and monitor build-ups of systemic risks to ensure appropriate measures are taken in a timely manner.

Looking ahead, the Zimbabwe economy is poised for a robust, balanced and sustained growth trajectory anchored on bold economic, financial and structural reforms and supported by a successful re-engagement with IFIs and other multilateral and bilateral creditors. This is expected to unlock the much needed foreign financing for infrastructure rehabilitation and development, retooling in the manufacturing sector and a building of international foreign currency reserves.