This weekend even the president of Zimbabwe was forced to acknowledge that Zimbabwe has an exchange rate problem. He promised that his government would unveil measures to address this searing problem soon. Today the RBZ announced what some of these measures and unlike last time they resolved to change nothing. This means that the measures put forward during the last Monetary Policy Commission will be the ones that remain in force despite the fact that they seem to be not working.

The perfect excuse

When confronted with evidence of their ineptitude the government of Zimbabwe is quite adept at dodging responsibility. It is always someone’s fault and never theirs. Perennially they have blamed our troubles on sanctions and drought but in the war in Ukraine they have a shiny new excuse and they are really putting it to good news. Never mind that Zimbabwe is not the only country affected. Their measures to counter the effects of the war were feeble and the Finance Ministry has been saddling everyone with tax after tax even in the face of more and more people slipping below the poverty datum line.

In a hilarious turn of phrase, the bank grudgingly admits that we went through a hyperinflationary period. Of course, they didn’t acknowledge their pivotal role in precipitating that said hyperinflationary period with Governor G. Gono at the helm. The man loved his quasi-fiscal money printing activities. He was also a skilled orator who lied and lied to the people of Zimbabwe and helped brew the perversive distrust his peers are now battling with. As already pointed out in a previous piece, it would not be fair to blame Dr Gono alone. The current crop has done its part in making sure we don’t trust the central bank. The current governor liked pretend that bond notes and the USD were equal, then pretended that the rate was $25 ZWL:1 USD for months before of course unleashing his “official rate” which everyone likes to pretend is free-floating.

The same measures will no doubt yield the same results. Meanwhile, expect the government to continue to praise themselves and admit no fault.

Below is a full statement from the RBZ on the issue:

The Monetary Policy Committee (MPC) of the Reserve Bank of Zimbabwe (the Bank) met on 29 April 2022 to discuss the recent macroeconomic and financial developments and their impact on the economy.

The Committee noted with concern the recent uptick in month-on-month inflation, from 7.7% in March to 15.5% in April 2022, and the increase in annual inflation from 72.7% in March to 96.4% in April 2022.

The increase in inflation was a result of a combination of global shocks and the pass-through effects of the recent exchange rate depreciation on the parallel market, with a significant proportion of the inflationary pressures emanating from the impact of the ongoing Russia-Ukraine conflict.

The Committee noted with satisfaction that the economic fundamentals have remained strong to support a stable exchange rate as evidenced by a favourable current account balance, positive growth of the real sector, public works undertaken by Government, fiscal sustainability and a tight monetary policy stance.

The positive trend in foreign currency generation has seen the country realising US$2.4 billion in foreign currency receipts during the first quarter of 2022, an increase of 15.9% compared to foreign currency received during the same period in 2021.

The foreign currency receipts were against foreign payments of US$1.8 billion, leaving a surplus of US$1.9 billion.

Money supply has also remained largely under control, with reserve money remaining stable at levels of around ZW$28 billion for the past six months, while annual growth in broad money fell from 384% in March 2021 to 151% in March 2022.

The existence of strong economic fundamentals suggests that the recent exchange rate shocks are a manifestation of negative sentiments or perceptions attributable to people’s past experiences with hyperinflation and inevitable losses incurred during currency reforms.

The Committee further noted that the erosion of people’s savings due to inflation compelled them to try and avoid similar losses by holding the US dollar as a store of value.

The Committee, therefore, welcomed the decision by the Government to come up with measures to enhance confidence in the economy, deal with market indiscipline and increase the demand for the local currency, which measures will go a long way in buttressing the current tight monetary policy stance, restoring confidence in the economy, taming market indiscipline, stabilising inflation and exchange rates and creating a conducive environment to support the envisaged economic growth rate of 5.5% in 2022.

In view of the foregoing developments, the Committee resolved to maintain the status quo in respect of the monetary policy decisions taken on 1 April 2022 as follows:

Maintaining the Bank Policy Rate at 80% and the Medium-Term Bank Accommodation Facility Interest Rate at 50%;
Maintaining the minimum deposit rates for ZW$ savings and time deposits at 12.5% and 25% per annum, respectively;
Maintaining the quarterly reserve money growth target at 5% for the quarter ending June 2022; and
Maintaining the foreign payment transactions limit on the willing-buyer willing-seller foreign currency trading arrangement for banks and bureaux de change at US$1 000 and allowing the Bank to increase the limit as conditions permit.