By 
Reserve Bank of Zimbabwe Governor Dr John Panonetsa Mangudya has been praised for Zimbabwe’s inflation trajectory which has reflected a positive impact of the series of interventions the Governor led from front both fiscal and monetary which he instituted in the past few months. Dr Mangudya’s interventions included, “the bank policy hike by RBZ, from 80-200 percent, to stymie speculative borrowing,” and this has seen inflation reduce in four straight months.
Mangudya exclusively revealed to TechnoMag that, “Many companies were borrowing at cheap interest rates to speculate in the currency and equities markets in a manner that hurt the domestic currency, which has depreciated from $2,5/US$1 in February 2019 to $632/US$1 on the formal market or $850/US$1 on the black market.”
Governor Mangudya opened up that among a cocktail of other measures by Treasury, he “Also increased statutory reserves, which determine the funds available to banks for on-lending, to squeeze the flow of excess liquidity into the market, helping to entrench exchange rate and inflation stability.”
Dr Mangudya indicated he will maintain a high-interest rate regime through 2022 and will only review them down if he notices a significant fall in inflation, which is not peculiar to Zimbabwe but a global phenomenon responding to dynamics caused by the war in Eastern Europe that of Russia’s invasion of Ukraine.
In addition, the RBZ Governor introduced gold coins in September as an alternative investment instrument, which helped to divert some of the excess liquidity in the market to engender exchange rate stability, which was the biggest factor in driving an inflation resurgence.
Since August this year, the office of the Reserve Bank of Zimbabwe Governor demanded that all Government suppliers and contractors set prices (value for money audits) in line with market trends based on the willing buyer-willing seller exchange rate to avoid overpricing, which saw unscrupulous businesses pocket super profits they used to buy forex and drive Zimbabwe dollar depreciation.
Not to be outdone, Finance and Economic Development Minister Professor Mthuli Ncube expects annual inflation to average 166,7 percent this year, and hopes to contain monthly inflation to 3 percent by year-end.
An Economic Commentator said, “The review and enhancement by the Government of its procurement processes and practices to ensure value for money have resulted in the stability of the exchange rate and a decline in inflationary pressures, so this is not a surprise.”
Another economist, said, “The country has been on a monetary policy tightening stance and these are the benefits of such activities, the gold coins, high-interest rates, and the Government (contracts) payment stance have led us to this point and all should be commended.”
Industrial companies and Bankers have been calling for interest rate cuts to enable companies to finance their operations, but quickly reversing this could spell a quick relapse into rampaging inflation.
Minister Mthuli Ncube said, “I think once we see that downtrend in month-on-month inflation being sustained, maybe over a three- to four-month period, then we can begin to think about lowering interest rates. But for now, the tough monetary-regime stance and also the tough fiscal stance stand.
“That’s what it takes to bring stability and bring things under control.”
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