Analysis of the Impact of the 2024 Mid -Term Monetary Policy Zimbabwe’s Competitiveness

The Reserve Bank of Zimbabwe (RBZ) Governor announced the 2024 mid-term Monetary Policy Review Statement on 30 August 2024. The recalibrated 2024 Monetary Policy Statement (MPS) on 5th April 2024 came at the backdrop of a depreciating local currency and skyrocketing inflation.

The Review comes at a time when the economy experienced stability after the introduction of the ZiG until August 2024. However, the stability in exchange rate and inflation is now under threat from the recent developments in the black-market exchange rate.

This analysis is in line with its mandate of facilitating the creation of a competitive business environment through the development, coordination, and implementation of key policy improvements. The likely impact of the policy review on competitiveness is highlighted below.

IMPACT ON COMPETITIVENESS

Exchange Rate Policy

The current exchange rate policy has brought stability on the foreign exchange market and therefore improves predictability and enhances competitiveness. Notwithstanding the positive developments, it is critical to note that the country is experiencing exchange rate misalignment with official interbank rate of 1USD:13.87ZWG against the average parallel market rate of 1USD: 23ZWG giving a premium of above 50%, as of 05 September 2024. This has huge implications on improving trust in the banking system and boosting confidence, thereby negatively impacting competitiveness.

Minimum interference by the authorities is being witnessed towards eliminating the well-established and thriving informal market. This interference continues to distort the exchange rate from being reflective and this limits the Central Bank’s efforts to unlock free funds from the private sector. This implies that the Government continues being the sole supplier of foreign currency on the formal market, evidenced by the MPS review acknowledging that 50% of export surrender value is being supplied to the formal market to improve foreign currency supplies. This continues to constrain supply of foreign currency on the formal market, hence negatively impacting on the competitiveness of the country.

The Commission recommends that the export surrender value should be a temporary measure, a truly reflective exchange rate that will unlock free funds from the private sector. The Government should exert its efforts on export promotion through incentives to increase foreign currency inflows and do away with the surrender value to improve export competitiveness..

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Analysis of the Impact of the 2024 Mid -Term Monetary Policy Zimbabwe’s Competitiveness | Document