- RBZ introduced a Targeted Finance Facility (TFF) to provide financing to specific sectors
- The Bank Policy rate remains unchanged at 35%, maintaining high borrowing rates
- The MPC expects inflation to remain stable, with monthly inflation moderating to pre-October 2024 levels,
- This is despite an 80% premium existing between formal and parallel market exchange rates
Harare- The Monetary Policy Committee (MPC) of the Reserve Bank of Zimbabwe has introduced a Targeted Finance Facility (TFF) In a bid to alleviate the current liquidity crisis on targeted sectors.
This facility is a type of financial instrument designed to provide financing to specific sectors, probably including agriculture, manufacturing, and mining, which requires heavy financing to keep operations afloat.
The TFF is administered through the banking system and aims to support businesses struggling to access credit due to tight liquidity conditions.
This was announced through a statement released by the Reserve Bank today following an MPC meeting held yesterday.
Despite the introduction of the TFF, the MPC has resolved to keep the Bank Policy rate unchanged at 35%. This decision means that borrowing rates will remain high, which may limit the ability of businesses to access credit and invest in their operations but curtailing speculative borrowing and exchange rate madness.
The MPC has also resolved to maintain the current statutory reserve requirements for savings and time deposits for both local and foreign currency at 15%, and for demand and call deposits for both local and foreign currency deposits at 30%.
Zimbabwe's inflation is expected to remain stable, with monthly inflation moderating to pre-October 2024 levels.
The MPC's measures to tighten liquidity conditions and curb speculative activities in the foreign exchange market have had some success in stabilizing the exchange rate and inflation since October 2024.
“The stability is reflected in the significant narrowing of the exchange rate premium from around 80%and a deceleration of month-on-month inflation from 37.2% in October 2024 to 11.7% in November 2024,” the Bank said in a statement.
The spike in month-on-month inflation in October was largely due to the once-off depreciation of the ZiG against the US dollar in September 2024 of about 43% in a single day.
Also despite RBZ saying exchange rates have been maintained, an 80% premium exists between formal and parallel market mirroring the last days of ZWL downfall.
Moving forward, the MPC expects the stability in the exchange rate to continue, benefiting from increased foreign currency inflows, which rose by 19.1% to US$11.05 billion during the 10 months to October 2024.
Equity Axis News
