RBZ commits additional ZW$2.5 billion lending facility to stimulate economic growth

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Whilst this Facility is necessary to enhance productivity, it needs to be continuously reviewed to manage the risk of increasing reserve money in the economy

Harare – The Monetary Policy Committee (MPC) of the Reserve Bank of Zimbabwe (the Bank) has approved additional funding for an amount of ZW$2.5 billion under the Bank’s medium-term lending facility to support the productive sectors and promote economic recovery.

This is a follow up to the Midterm Monetary Policy Statement delivered on August 21, 2020 where the Bank announced that a total of ZW$2.6 billion had been disbursed to banks as at 30th June 2020 under the medium-term lending facility.

In a press statement following the MPC meeting on 2 October 2020, RBZ Governor Dr John Mangudya who is also the MPC Chairperson said, “The funds will be accessed by final beneficiaries through normal banking channels under an arrangement that is consistent with the conservative monetary targeting framework being pursued by the Bank.”

“Accordingly, banks are encouraged to ensure that repayments by their customers from the existing financing facilities are used to augment the Bank’s medium-term financing window.”

The source of the funds is not specified but the Bank indicated in the August 2020 monetary policy statement that it will keep a tight leash on reserve money growth.

“Whilst this Facility is necessary to enhance productivity, it needs to be continuously reviewed to manage the risk of increasing reserve money in the economy,” reads part of the monetary policy statement.

Meanwhile, the MPC resolved to maintain the interest rate at 35%, a level that was set earlier in June.

In developments this year, the interest rate was reduced from 35% to 15% earlier in April after businesses made representations to the apex bank to reduce the bank rate to circa 20% following the advent of the coronavirus (Covid-19) pandemic.

But a rise in speculative borrowing has forced the central bank to backtrack on the earlier policy shift, increasing the rate to 35% in June.

Dr Mangudya said the measures are meant to buttress price and financial system stability in order to foster the country’s economic recovery process.

“Maintaining a status quo on both the policy rate for overnight accommodation at 35% and the medium-term lending rate for the productive-sector lending at 25%. This decision on interest rates takes into account of the current tight liquidity conditions in the market and the need to continue controlling speculative borrowing,” he said.

In another resolution, the Committee resolved to maintain the limit of ZW$5 000 per transaction for mobile money transactions and adopting a weekly limit of ZW$35 000.

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