Deputy News Editor
Government is working on a cocktail of fiscal and monetary measures that will trigger an expansion of the country’s foreign currency generation capacity, stabilise the interbank market and tame inflation to below 15 percent by year end.
In an interview with The Sunday Mail, following the renewal of his term by President Emmerson Mnangagwa, Reserve Bank of Zimbabwe governor Dr John Mangudya said stabilisation of the interbank foreign currency market was a key determinant to fight price increases.
He said, “We are working on a number of initiatives to expand the country’s capacity to earn foreign currency and putting in place lines of credit to mitigate the shortfall from the country’s exports.
“These measures are going to stabilise the interbank forex market… A stable exchange rate is necessary for price stability.”
Dr Mangudya said the country was going through an economic phase that required businesses and consumers to exercise patience and restraint from speculative pricing and rent-seeking behaviour.
He expressed confidence the economy would stabilise while inflation would go down to below 15 percent by year end.
“As you know, inflation is caused by an increase in money supply. Limiting the growth of money supply is, therefore, designed to reduce inflation,” said Dr Mangudya.
“I therefore want to assure the nation that we are on the right trajectory to achieving a lower inflation level of below 15 percent in the last quarter of this year and further lower inflation levels in 2020 on account of the base effect and the stability of the economy.”
Inflation is currently pegged at 66,8 percent.
Dr Mangudya added that there was need for authorities to deal with market indiscipline for the economy to prosper.
He dismissed reports from certain quarters suggesting that the RBZ was the chief driver of the illegal foreign currency market.
Dr Mangudya said such reports were misguided and meant to dampen confidence in the economy.
He said immediate priorities during his second term in office would be to pursue confidence building measures, maintain price stability, enhance productivity and exports across all the sectors of the economy.
President Mnangagwa recently extended the governors tenure by another five years.
The extension was made in terms of Section 14 of the RBZ Act (Chapter 22:15) which stipulates among other conditions that “the Governor and Deputy Governors shall be appointed for their competence and experience in matters relating to banking, finance and economics.”