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Nelson Gahadza

Senior Business Reporter

THE Reserve Bank of Zimbabwe (RBZ) has recalibrated the bank policy rate from 130 percent per annum to 20 percent, consistent with the new monetary policy framework that aims to address the current state of price and exchange rate instability in the economy.

Presenting the 2024 Monetary Policy Statement in Harare yesterday, the RBZ Governor, Dr John Mushayavanhu, said the monetary policy framework was informed by two strategic policy pillars that were; restoring price and exchange rate stability and remonetising the local currency for it to serve its role as a medium of exchange and a store of value in a multi-currency system.

“The policy seeks to rebuild market confidence and trust, as well as bank policy credibility,” he said.

According to the MPS, the overnight accommodation interest rate has been set at 5 percent above the bank policy rate and the bank deposit facility interest rate at 7,5 percent below the bank policy rate, thus giving the starting interest rate corridor of between 11 percent and 25 percent per annum.

The bank policy rate and the corresponding interest rate corridor will be reviewed by the Monetary Policy Committee (MPC) from time to time in line with inflation developments.

Minimum savings and time deposits interest rates on ZiG are set at 9 percent and 7,5 percent below the bank deposit facility rate of 12,5 percent, respectively.

“Minimum interest rates on FCA deposits remain unchanged at 1 percent and 2.5 percent for savings and time deposits, respectively.”

Dr Mushayavanhu indicated that banks would not charge monthly bank maintenance or service charges for individual bank accounts with a conservative daily balance of US$100 and below or its equivalent in ZiG for a period of up to 30 days. The development is aimed at improving the savings culture, as opposed to a situation whereby most bank deposits were transitory.

The statutory reserve requirements for demand deposits in ZiG and savings and time deposits in ZiG remain standardised at 15 percent and 5 percent, respectively.

To foster continued financial sector stability in the face of increased lending in foreign currency, measures will be put in place to enhance foreign exchange liquidity, moderate foreign currency exposures and mitigate against payment gridlocks in the banking sector.

“In this regard, the Bank is increasing the statutory reserve ratio for foreign currency demand deposits from 15 percent to 20 percent with effect from April 8, 2024.

“The statutory reserve requirements for foreign currency time and savings deposits shall, however, remain at the current level of 5 percent,. 

He also highlighted that going forward, open market operations would be carried out to ensure that reserve money would always be fully backed by a corresponding composite basket of reserve assets comprising precious minerals, predominantly gold and foreign currency balances.

The governor said all the current non-interest-bearing non-negotiable certificates of deposits (NNCDs) in ZiG beyond the optimal liquidity level and those encumbered by existing foreign currency structures would be converted into tenors of one year and above.

The government has over the past few months instituted a plethora of measures to stabilise inflation and exchange rate volatility and the measures include continued tight monetary and fiscal policies.

However, according to Dr Mushayavanhu, the banking sector has remained safe and sound, with sufficient buffers for capital and liquidity, good asset quality and sustained profitability.

Accordingly, the RBZ oversight and financial surveillance framework would be reinforced to improve the current state of the financial sector and foster a culture of discipline and compliance.