RESERVE Bank of Zimbabwe (RBZ) governor John Mangudya yesterday blamed Zimbabwe’s deteriorating crisis on confrontations between Russia and Ukraine as he downplayed economic shocks that were already frustrating recovery before the war flared in February.
In a statement in which he tried to calm deepening worries across the country, the RBZ chief traced the historical background to Zimbabwe’s troubles to 2008.
However, his paper, which was issued following a Monetary Policy Committee (MPC) sitting on April 29, offered no new measures to tackle growing hardships highlighted by 96,4% inflation.
It is Africa’s highest inflation rate, whose effects authorities have glossed over, having gone through a 500 billion percent rate 14 years ago.
“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 RBZ chief said.
The RBZ governor said despite the troubles, fundamentals remained strong, with a “stable” exchange rate and healthy foreign currency inflows.
However, the Zimbabwe dollar has been battered since January, sliding to US$1:$400 on the black market this week, from about US$1:$220 in December last year.
The domestic unit has also depreciated by wider margins on the official market, where the RBZ maintains a tight grip on the exchange rate.
“The increase in inflation was as 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 on-going 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,”
He said the MPC had noted that the erosion of people’s savings due to inflation in 2008 was forcing them to avoid “similar losses by holding the US dollar as a store of value”.
The MPC maintained the status quo, with the bank policy rate remaining at 80%, while the medium-term bank accommodation facility’s interest rate was unchanged at 50%.