Inflationary pressures have dissipated – Mangudya
Oliver Kazunga, Senior Business Journalist
The country’s success in containing inflationary pressures has created an enabling fiscal and monetary environment, essential to support the ambitious economic growth target of 7.8% this year, said the Governor of the Reserve Bank of Zimbabwe (RBZ) , Dr. John Mangudya.
In his medium-term monetary policy statement released on Thursday, Dr Mangudya reiterated that Zimbabwe’s economy was rebounding despite the negative impact of Covid-19, which continues to claim lives and has frustrated chains of global economic value.
His views support the recent forecast for gross domestic product (GDP) growth revised by the Treasury to 7.8% from 7.4% initially.
The latest official statistics showed a significant drop in annual inflation from 837.5% in July 2020 to 106.6% in June 2021.
Last week, Zimstat reported that July year-on-year inflation had declined to 56.37% and 2.56% month-on-month.
The government attributed the positive gains to prudent policy interventions, coupled with the smooth functioning of the currency auction system, the resurgence in commodity prices and the bumper harvest achieved this year.
“The government has shown an unwavering commitment to maintaining the momentum for economic reform. Despite the hardships caused by the Covid-19 pandemic, the economy is rebounding, ”said Dr Mangudya.
“The bank is confident that the current stability of inflation and exchange rates, supported by a sustained performance of the external sector, will continue over the forecast period.
“As a result, inflationary pressures in the economy have dissipated, creating a favorable monetary and financial environment essential to support the projected 7.8% growth in 2021 and robust economic growth over the medium term.”
Close coordination between fiscal and monetary authorities, as evidenced by sustained fiscal discipline and tight monetary conditions, has promoted macroeconomic stability, Dr Mangudya added.
He also noted that national economic growth would also be boosted by the expected recovery of the global economy in 2021 and the ripple effects of stimulus packages in developed countries and Asia, as well as the Special Drawing Rights that will be available soon. (SDR) allocations to the world economy by the International Monetary Fund from which Zimbabwe is expected to receive $ 1 billion.
“The strong global economic recovery has led to a rise in international commodity prices, especially platinum, nickel and copper,” he said.
“In addition, tobacco prices were firmer at an average price of US $ 2.92 per kilo during the marketing year just ended compared to the previous season when the average price was 2, USD 55 / kg. “
Dr Mangudya said foreign exchange earnings remained strong with US $ 4.02 billion being received in the first half of the year compared to US $ 3.12 billion received in the same period of the year. last, which represents a 29.1% improvement in the supply of foreign currency. in the economy.
Of this, diaspora remittances received through the formal system amounted to US $ 649 million, an increase of 73 percent from the US $ 374.6 million received during the same period. in 2020.
“These positive economic developments are essential for maintaining the currency auction system, which has had a significant impact on the national economy since its inception on June 23, 2020,” said the governor.
As a result, capacity utilization in the manufacturing sector has increased from 36% in 2019 to 47% last year and is expected to increase further to exceed 61% by the end of this year. The umbrella bank kept the key rate at 40% and the medium-term key rate at 30% during the first half of the year.
“These measures, along with the forward guidance from the MPC’s (Monetary Policy Committee) on interest rates, have helped create and maintain the current accommodative monetary and financial conditions,” said Dr Mangudya.
To support the growth of the productive sector, the monetary authority introduced in November 2019 the medium-term bank accommodation facility, largely focused on supporting agricultural production.
Support has been extended for the winter wheat planting program during the 2020 season, which has helped achieve a decent wheat crop of over 161,432 tonnes, enough to cover more than five months Zimbabwe’s needs.
“It is therefore imperative that such support programs are implemented to replace imports,” said Dr Mangudya.
“The outstanding amount under the Bank’s Medium-Term Housing Facility is approximately $ 4.13 billion.”
In May 2021, the MPC approved an additional $ 2.5 billion for growing winter wheat. In view of the pressure induced by Covid-19 on micro, small and medium-sized enterprises, the RBZ has introduced a $ 500 million facility to meet the financing needs of the sector. – @okazunga