Lilongwe – Zimbabwe’s monetary authorities have been credited for sound exchange rate policies that have resulted in stabilisation of the local currency.
A new World Bank Zimbabwe Economic Update (“Overcoming economic challenges and the pandemic”), says the currency reforms have ushered in the economic stability that the country has needed for years now.
According to the World Bank, ensuring macroeconomic stability is a strong basis for supporting private sector-led recovery and improving social conditions.
“The government’s efforts to stabilise prices through prudent fiscal policy and rules-based monetary and exchange rate policies have been effective and must be continued to enhance confidence and improve macroeconomic conditions,” said the financier.
As at April 30, 2021 yearly inflation rates had fallen from 837 percent to 194 percent amid the slowdown of the Zim dollar’s depreciation on both the black market and official platforms.
This followed introduction of a foreign exchange auction system in June 2020 by the Reserve Bank of Zimbabwe, alongside other measures to tame a volatile exchange system.
The World Bank encouraged implementation of policy reforms as outlined in the government’s recently launched National Development Strategy.
On the fiscal side, the institution suggested that stringent fiscal policies were required to reduce distortive spending and redirect resources where they were most needed, including to ensuring delivery of basic social services.
“Maintaining price and exchange rate stability will require the RBZ to limit the growth of monetary supply, primarily by avoiding monetary financing and all quasi-fiscal activities, while ensuring high transparency and accountability of monetary policy.”
Growth is expected to reach four to five percent in 2021, and inflation returning to single digits in 2022.