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The World Bank has commended the Reserve Bank of Zimbabwe for putting a tight Monetary Policy that has managed to ease inflation. The latest WB titled Zimbabwe Economic Update acknowledges that the country has been on a strong rebound since the COVID-19 pandemic on the back of adequate policy measures.
The policy has improved macroeconomic stability on the back of accelerated economic activities despite global challenges underscoring that the nation was one the fastest growing economies in the Southern African Development Community [SADC] in 2021, 2022, and in 2023.
“The RBZ has been proactive in tightening monetary policy; increasing reserve requirements for the banking sector, and raising the bank policy lending rate. Furthermore, reserve money growth was curbed by issuing non-negotiable certificates of deposits (NNCDs) and Gold-Backed Digital Tokens to absorb excess Zimbabwe dollars. This has helped to bring down inflation and the parallel market premium. The Government has also extended the use of US dollars as legal tender until 2030, further reducing policy uncertainty,” says the WB.
The global financier also acknowledged the recent moves by the RBZ which saw the recommendation to remove the 10% cap over and above the exchange rate saying if adopted, the directive will present an important step to further liberalization of the foreign exchange market.
“Finally, the financial sector remains adequately capitalized, with non-performing loans (NPLs) at very low levels. The financial sector has significant capital reserves¹² and can withstand unexpected shocks or losses. Banking institutions remain compliant with the prescribed minimum capital adequacy ratio of 12% and tier 1 ratio of 8%, although the recapitalization of all banks has still to be completed. Average NPLs remain minimal, estimated at 1, 58% of banking sector loans in December 2022, but this is against limited bank intermediation,” WB added.
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