Reserve Bank of Zimbabwe (RBZ) has today released the 2021 Monetary Policy Statement. The following are the monetary policy measures in the latest RBZ publication.
a. Increasing the Bank policy rate for overnight accommodation from the current 35% to 40% per annum and the medium-term lending rate for the productive sector lending from 25% to 30% per annum. The decision on interest rates takes into account the current liquidity conditions in the market and the need to continue controlling speculative borrowing.
b. Increasing statutory reserves from 2.5% to 5% for demand and/or call deposits and maintaining 2.5% for time deposits. The differentiation of statutory reserves by maturity is expected to incentivise banks to hold long-term liabilities or time deposits which will facilitate long-term lending in the medium-term.
c. Maintaining the conservative monetary targeting framework in 2021. This will be achieved by reducing the quarterly reserve money growth from the 25% quarterly target in 2020 to 22.5% per quarter in 2021.
d. Increasing the cash withdrawal limits to ZW$2 000 for individuals and maintaining the current limits on mobile banking transactions at ZW$5000 per transaction and an aggregate limit of ZW$35 000 per week. This measure will enable the transacting public to continue conducting small transactions using cash, whilst large transactions are conducted through
electronic banking. As previously advised, the Bank shall soon be introducing a ZW$50 banknote to augment the current stock of banknotes in circulation. The Bank reiterates that banknotes, new or old, do not cause inflation in an economy since they do not increase money supply.
e. Maintaining and sustaining the auction system through the 40% export surrender requirement, 20% domestic foreign exchange sales proceeds surrender requirement and 15% foreign exchange contribution from the fiscus. Maintaining the foreign exchange auction system remains paramount in anchoring inflation and maintaining price and financial system stability. The Bank shall continue refining the foreign exchange auction system taking into account market fundamentals as well as closely monitoring the utilisation of funds from the foreign exchange auction system and the economy at large.
f. Putting in place a definitive programme for accounting and expunging of foreign exchange obligations under the blocked funds and foreign exchange legacy-debt framework. This framework will be designed to ensure that it is not inflationary and takes into account local and international audit requirements.
g. Maintaining the status quo on the minimum capital requirements for banks and microfinance institutions. The Bank is encouraged by the capital preservation measures that the banking sector has put in place towards compliance with the minimum capital requirements effective 31 December 2021.
h. Ensuring that banking institutions comply with the Banking (Savings Interest Rates) Regulations, S. I. 65A of 2020, which require every banking institution to pay interest on call, demand, savings deposits and mobile banking trust accounts at rates prescribed under the regulations. For mobile banking trust accounts, banking institutions must comply with the requirement to credit interest due on a monthly basis, proportionately to each customer’s daily closing balance during each month.
i. Ensuring that Authorised Dealers or banks and foreign exchange auction system participants comply with auction rules and regulations to curb abuse of the foreign exchange auction and safeguard the auction from being abused as a breeding ground for arbitrage opportunities.
j. Establishing a Fintech Regulatory Sandbox to allow entities to list their financial products, services or solutions within a controlled environment. The Fintech Regulatory Sandbox which will be housed at the Bank will be open for financial innovation with effect from 1st March 2021. The Regulatory Sandbox guidelines are being finalised and will be accessed from the Bank’s website.