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Monetary
Policy Interim Statement
Gideon Gono, Governor of the Reserve Bank of Zimbabwe
April 26, 2007
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Summary
Copyright: MBCA Bank Ltd
The Governor of the Reserve Bank of Zimbabwe presented his interim
Second Quarter Monetary Policy Statement today. Our detailed analyses
of the key provisions will follow later, but below we provide the
key highlights:
- The Governor
indicated that the fine tuning of monetary policy was necessitated
by economic developments since his last statement on 31 January
2007 and also to take cognizance of the pillar of support provided
by the SADC leaders at their last summit
- The ideology
is for a market-based economy but we are not yet there
- 2007 is
a drought year and already 500 000 metric tones of maize have
been imported
- Concern
with lack of progress on the social contract as no single protocol
has been signed
- Mechanisaton
of agriculture at full throttle covering communal farmers with
array of agricultural equipment having been bought
- The banking
sector is in a sound condition
- Export performance
was US$421 million of the first quarter which was 23% up on same
period in 2006
- No devaluation
but new exchange rate mechanism put in place covering particular
sectors:
- Gold support
price increased from Z$16 000 per gram to Z$350 000 per gram
with effect from 27 April 2007
- Establishment
of a Drought Mitigation and Economic Stabilisation Fund open
to all holders and generators of foreign exchange: foreign exchange
will be bought at current rate of Z$250/US$ and an accelerator
of 60 is applied to bring an effective rate of Z$15 000/US$.
The money raised will be sent to RBZ for the Strategic National
Fund
- Establishment
of Drought Mitigation and Economic Stabilisation Bond whose
terms are:
- Interest
rate of libor plus 10% of foreign exchange invested
- The
bond is for 2 years with half year interest payments
- Principal
plus interest can be repatriated for money brought from
outside the country
- Supported
by RBZ irrevocable guarantee backed by CD1s with known exports
- Bond
open until December 2007 to all generators of foreign exchange
and foreign investors
- Tobacco
crop expected to be 80 million kgs which is 45.5% on the last
season's output. Tobacco farmers to be paid a top up price
of Z$40 000 per every kg that fetches US$1.5 and above and this
amount will be prorated for lower amounts. A back pay of Z$85
will be paid for last season's deliveries. FCA retention
increased from 15% to 20%
- All generators
of foreign exchange to return 60% in FCAs and 40% will go to
the Drought Mitigation and Economic Stabilisation Fund
- Free funds
remain exempt from surrender requirements
- Accommodation
rate increased from 500% and 600% to 600% and 700% for secured
and unsecured accommodation respectively
- Statutory
reserves increased by 5% except for building societies which has
been reduced from 30% to 10%
- Cash withdrawal
limits for individuals and corporate increased from Z$500 000
to Z$1 500 000 and Z$1 000 000 to Z$3 000 000 respectively as
already announced
- ZETSS -
intra-day limits for commercial banks increased. After 1 June
2007 no checks of Z$50 million and above will be allowed through
the clearing system
- Whistle
blower fund for smuggling of diamonds, gold and platinum of 5%
of value of prosecutable recoveries
- Proposal
for amnesty for externalized resources
- Call for
removal of sanctions
- Inflation
going to remain high with the figure for March 2007 at 2 200%
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