RESERVE Bank of Zimbabwe (RBZ) governor, John Mangudya is expected to present the 2016 Monetary Policy Statement (MPS) tomorrow amid expectation that he will come up with measures to stimulate the ailing economy.
Some of the challenges facing the economy include unreliable power supplies, falling global commodity prices that have hurt the mining industry which government has identified as a key sector to drive Zimbabwe’s economic growth, corruption, lack of transparency, low capacity utilisation in industries and lack of competitiveness for locally manufactured products.
Expectation are also that the RBZ chief will clearly spell out the country’s progress in raising offshore credit to finance arrears clearance with the three international financial institutions namely International Monetary Fund (IMF), World Bank (WB) and African Development Bank (AfDB).
Last year Zimbabwe committed to clear about US$1,8 billion in debt arrears to the three international financial institutions by end of June.
Zimbabwe’s debt arrears to the International Monetary Fund (IMF) amounts to US$110 million, the World Bank (WB) US$1,5 billion and US$601 million to the African Development Bank .
If honoured, it is hoped that the agreement will see Zimbabwe unlocking fresh capital from external creditors to which the country owes about US$10 billion.
The debt continues to undermine the country’s ability to attract offshore credit at competitive rates.
Spelling out the strategy is important especially given that this is the last MPS to be announced before the deadline date.
Mandudya’s statement comes before the IMF concludes a final review of the economic reform plan, the Staff Monitored Programme, on Zimbabwe, whose review is expected before the end of this quarter.
Zimbabwe has met the benchmarks in prior assessments.
Analysts say Mangudya should also revise lending rates being quoted by banks which still remained high, against the backdrop of deep-seated liquidity shortages as a consequence of limited access to external credit lines and adverse balance of payments developments.
The lending rates also reflected high premiums charged by some banks, irrespective of their cost structures.
Consequently, expectations are for an expansionary policy in the hope that the resulting credit rates would help stimulate economic growth.
Given the current situation where the country is using a basket of foreign currencies as legal tender, analysts say not much is expected from the monetary policy as the RBZ had become feeble on account of lack of the country’s own currency to influence monetary policy.
Monetary policies since the country adopted dollarisation in 2009 have been largely insignificant as the country is using foreign currency, reducing them to regulatory pronunciations.
Experts also urged government to recapitalise RBZ within a specified timeframe in order to guarantee effectiveness of the 2016 monetary policy.
Recapitalisation of the RBZ is also critical in restoring the monetary authority’s lender of last resort function.
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