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“We Don’t Want To Sacrifice Stability For Growth” – Mangudya On RBZ Increasing Interest&Policy Rates

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Reserve Bank of Zimbabwe Governor Doctor John Panonetsa Mangudya has warned against speculative borrowing and to discourage it, decided to increase interest and policy rates if push comes to shove.

Speaking at the Zimbabwe Institute of Strategic Thinking (ZIST) breakfast meeting yesterday, Doctor Governor Mangudya stepped up the fight against currency instability through increasing interest rates in line with inflation to discourage speculative borrowing and improve business confidence in the country.

At the breakfast dialogue yesterday Mangudya did his best to infuse confidence in the economy and behavior by many as fundamentals that affect the exchange rate are Mangudya said, “In this country there are two demands for foreign currency, there is import demand for foreign currency, there is the foreign import demand for foreign currency, then there is also the store value import demand.Unfortunately the other one, the import demand is known. And as we meet very soon as the MPC obviously with inflation where it is we expect to find that we are going to increase further the interest rate, policy rate, what that means because when we put a policy it means none of you are going to get money with cheaper prices because we going to go to and you will be pushing us this far not because we want to do it but because we cannot sacrifice stability for growth.”

Zimbabwe’s business sector under the banner Zimbabwe Institute of Strategic Thinking met Reserve Bank of Zimbabwe Governor and officials to find a lasting solution to the currency volatility, with a broad objective of closing policy gaps and improve monetary confidence in the economy.

Industry and the business community highlighted the need for monetary policy consistency to cultivate confidence in the economy.

“As business ,our sincerity has been questioned because of the volatility of the currency situation as such we are appealing with you Governor, to brainstorm here and come up with effective solutions that arrest the prevailing depreciation of the local currency which is not friendly to anyone, as such we are available as business to support efforts by government,” said one local Business man.

RBZ Governor Dr John Mangudya emphasized that the current monetary challenges are based on behavioural issues as the fundamentals that affect the exchange rate are sound.

He also revealed that the central bank will be mopping up excess liquidity in the market as it intensifies the fight against currency volatility.

“As monetary authorities, our decisions are informed by figures and I can factually state that all the fundamentals are in place and the only challenge is dealing with expectations largely informed by past experiences, not by anything else. As such, going forward we will implement measures to tighten liquidity of the local currency which has been one way or another,” he said.

Zimbabwe’s economic targets require a resilient macroeconomic climate anchored on currency stability.

The Reserve Bank of Zimbabwe is currently operating a tight monetary stance in support of the 2022 National Budget and authorities have been implementing measures to strengthen the Zimbabwean Dollar’s appeal as the currency of reference.

The general consensus among economists is that currency stability is a confidence booster which is key in the collective journey towards President Emmerson Mnangagwa’s upper middle income Economy vision by 2030.

Indeed the Central Bank intends to increase interest rates to discourage speculative borrowing if behavior does not change. As confirmed the Economic fundamentals are sound hence no need to encourage speculative behaviour that is detrimental to policy Consistency.

ross moyo

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