Zimbabwe: After Introducing a New Currency, Zimbabwe's Central Bank Projects 5% Annual Inflation By Year-End

28 June 2024
New Zimbabwe (London)
By Alois Vinga

THE Reserve Bank of Zimbabwe (RBZ) has projected annual inflation to recede to just 5% by year-end on the back of the stable Zimbabwe Gold (ZiG) currency and exchange rate stability prompted by the tight Monetary Policy Stance (MPS).

In an update Thursday, RBZ governor, John Mushayavanhu said the Monetary Policy Committee (MPC) met on 26 June 2024 to assess the performance of the MPS measures announced on the 5th of April 2024 and deliberated on recent macroeconomic and financial developments in the economy.

"The stabilisation measures implemented by the Bank since the beginning of April 2024 have resulted in a month-on-month ZiG inflation rate of minus 2.4% in May 2024.

"The inflation rate is expected to be around 0% in June 2024 due to declines in both food and non-food inflation. Inflation pressures will remain subdued in the outlook period with projected inflation to end the year below 5% as the exchange rate remains stable," Mushayavanhu said.

This follows the launch of the ZiG currency on April 5 2024 which has sustained value against the greenback at a rate of US$1: ZiG 13, 56. The events have also seen the easing of volatility in the parallel market for a straight three-month record.

Consequently, movements in the prices of basic commodities have eased when compared to the period before the inception of the ZiG currency.

The MPC has resolved to maintain the current tight monetary policy stance to ensure the sustenance of the current stability.

Accordingly, the committee resolved to maintain the current policy measures; to maintain the current Bank Policy rate at 20% per annum and an interest rate corridor of 11% to 25%; to maintain the statutory reserve requirements for demand deposits, and savings and time deposits in ZiG at 15% and 5%, respectively.

The MPC also agreed to maintain the foreign currency statutory reserve requirements for demand deposits, and savings and time deposits at 20% and 5%, respectively.

"The Reserve Bank will continue to ensure full backing of the reserve money with gold, other precious minerals, and foreign currency reserves. This will ensure that growth in reserve money is consistent with improved economic activity and increased reserves backing the domestic currency," added Mushayavanhu.

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