RBZ Pledges To Keep Inflation In Check

Kuda Chideme

The Reserve Bank of Zimbabwe (RBZ) says it will continue fighting inflation through restrictive monetary policy and building foreign exchange reserves to strengthen the value of the local currency.

This was part of the resolutions agreed on at a meeting between the RBZ and the business community this week.

The purpose of the engagement was for parties to deliberate on how to enhance price stability within the economy.

Though authorities have managed to tame year-on-year inflation to 60.7 percent from 348.6 percent recorded in 2020, exchange rate volatility remains a major threat to the country’s economic stability,
dampening confidence in the local currency.

While the law allows for dual currency pricing, most transactions are carried out in US dollars with local currency attracting a premium of as much as 200 percent.

Without being specific the central bank said it would come up with strategies to enhance the attractiveness of the local currency and strengthen its demand in the context of the multicurrency system currently in place.

The RBZ also committed to refining the foreign exchange auction system and to timely funding auction allotments in line with the auction rules.

Last year the auction accumulated backlogs of up to 12 weeks as demand for hard currency on the platform outstripped supply.

“The relevant regulatory authorities should continue to carry out enhanced due diligence on auction participants and to monitor the use of funds obtained through the auction and come down strongly on those who submit fake documents (including invoices and bills of entry) and resort to suspension for periods not less than 6 months and blacklisting,” the RBZ said in a statement released after the meeting.

“Business must ensure compliance with the provisions of Statutory Instrument 127 of 2021 now embedded in the Finance Act (Amendment Number 7 of 2021), with emphasis on avoiding abuse of
auction rules and funds from auction allotments; exchange rate manipulation or currency attacks; and Noncompliance with the Bank Use Promotion Act”.

Additionally, the central bank said the Government has to continue with efforts to reduce the level of formalisation in the economy and to maintain fiscal consolidation.