THE Reserve Bank of Zimbabwe (RBZ) has reduced its bank policy rate from 150 percent to 130 percent per annum and noted that currency retentions on exports shall be standardised at the level of 75 percent across all sectors of the economy.
All special dispensations granted to some sectors of the economy shall be removed.
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Book NowReduced lending rates are expected to bring cheer to the productive sector, as well as ease borrowing costs to individuals and small businesses keen to access cheaper lines of credit or personal loans.
RBZ governor Dr John Mangudya noted in a statement that the central bank’s Monetary Policy Committee met on Monday and deliberated on recent macroeconomic and financial developments in the economy.
According to Dr Mangudya, the MPC was pleased with the relative exchange rate and price stability obtaining in the economy since June 2023.
He said the MPC noted, with emphasis, the need to ensure that inflation expectations continued to be firmly anchored through urgent attention to any emerging risks.
The MPC also noted that there was a need to continue promoting solutions that were aligned with the digital space and plastic money environment that the country found itself in and, in that regard, the MPC applauded the central bank for continuing to engender financial inclusion in a market-based and cash-lite driven economy.
To that end, he said several key resolutions were made.
“With immediate effect, the Bank Policy rate has been reduced from 150 percent to 130 percent per annum and the Medium-term Bank Accommodation (MBA) interest rate for the productive sectors including individuals and MSMEs will be maintained at 75 percent per annum,” Dr Mangudya said.
The MPC further noted that the negative impact of emerging global risks, including subdued global growth emanating from geo-economic fragmentation and the effects of tight monetary policy, high interest rates, credit squeeze and low international commodity prices, could pose significant risks to the current stability in the domestic economy.
Global growth was expected to slow down from 3,5 percent in 2022 to 3,0 percent in 2023 and to 2,9 percent in 2024, which is far below the historical average of 3, 8 percent.
Due to the negative developments in the global economy, prices for most mineral commodities including platinum, nickel and lithium have been declining, negatively affecting export receipts in the economy.
“As a result, export receipts, which are the main source of foreign currency for both the wholesale and retail foreign exchange auctions and for servicing the country’s foreign commitments, fell by nine percent over the nine months to September 2023, from US$4,5 billion during the comparable period in 2022 to US$3,6 billion.”
Recently, mining houses said falling global metal prices are taking a heavy toll on their viability.
The mining companies have since made an impassioned plea for the Government to intervene to limit the impact of the falling global mineral prices.
They have proposed interventions such as a reduction of some of the taxes and cost of key enablers like electricity.
Mining is a strategically key economic sector for Zimbabwe.
Apart from employing thousands, mining in Zimbabwe accounts for over 12 percent of gross domestic product and generates well over three-quarters of the country’s export earnings.
Over the past 12 months the mining industry across the globe has experienced softening prices for key minerals with the most affected being rhodium -74 percent, lithium -69 percent, diamond -60 and nickel -8 percent.
The World Bank’s metals and minerals price index rose 10 percent in the first quarter of 2023. Price increases at the beginning of the year reflected positive sentiment about stronger demand amid supply disruptions for some key metals.
Metal prices were forecast to fall this year as supply recovers amid weak demand in advanced economies and China. Zimbabwe’s mining companies said operating costs had increased by 10 percent in the past 11 months
“With effect from 1 November 2023, foreign currency retention on exports shall be standardised at the level of 75 percent across all sectors of the economy and all special dispensations granted to some sectors of the economy shall be removed.
“The net effect of this measure is to increase foreign exchange resources available to the Bank and Government to meet foreign exchange requirements for the settlement of national and international obligations,” Dr Mangudya further noted.
In order to support the continuous fine-tuning and further liberalisation of the foreign exchange market, Dr Mangudya said with a view to guaranteeing and safeguarding exchange rate stability, it is recommended that the limit of 10 percent trading margin above the interbank rate be removed.
“The MPC will remain alert to attend to any emerging risks, emanating from both the domestic and international fronts, in its commitment to ensuring stability in the exchange rate and general price levels.”
Chronicle
