Reserve Bank of Zimbabwe (RBZ) has further tightened money supply by introducing special exchange rate-linked corporate open market operations bills to control inflation.
Central Bank Governor John Mangudya said that the operations bills are for the purposes of directly dealing with the growth of money supply in the economy.
“These bills will be targeted at corporates with huge local currency balances or those receiving huge payments in local currency, as some of these funds are being used to destabilize the foreign exchange market,” Mangudya said.
The Governor also said the measure is to support the stability of the foreign exchange market.
Annual inflation which has been going down since January from 363.63% to 50.24% in August went up to 51.55% in September.
The month-on-month inflation rate stood at 1.9% going up from 1.3 in August and 0.7 in July.
The Central Bank estimates Zimbabwe’s inflation rate to end between 35% and 53%, up from the earlier forecast of 255 to 35%.
Zimbabwean officials had hoped to end the year 2021 with a below 10% inflation.
Besides the monetary supply, the RBZ Governor has also raised concern that developments on the black market are likely to exert further inflationary pressures in Zimbabwe’s economy.
The Zimbabwean dollar has been losing value on the black market to US1:170 from US1:130 in April.
Such fears have been followed by the Central Bank releasing 30 individuals allegedly abusing mobile phone lines and social media for illegal foreign exchange transactions and money laundering activities.
Officially on the foreign exchange auction the Zimbabwean dollar rates at US1:87 RTGS.
In terms of the money supply, the central bank reduced the quarterly reserve money growth target to 20% for the two remaining quarters of 2021 in order to sustain the macroeconomic stability brought about by the restrictive monetary policy stance.
“This move was necessitated by heightened speculative pressures on the parallel market, which have a potential destabilizing effect on price stability,” Mangudya says.
