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Monetary Policy Statement - December 2009
Gideon Gono, Governor of the Reserve Bank of Zimbabwe
January 29, 2010

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Consolidating the gains of macroeconomic stability

1. Introduction and background

1.1 This Monetray Policy statement is issued in terms of Section 46 of the Reserve Bank of Zimbabwe [Chapter 22.15] to lay out the focal policy areas that will guide the Monetary Policy implementation programmes over the next 6 months.

1.2 In drawing this policy, the Bank is also guided by Government's overall short-term, medium term and long term economic and social programmes, as recently enunciated in the 2010 National Budget that was unveiled by the Hon. Minister of Finance on the 2nd of December, 2009, as well as the Three Year Macro-Economic Policy Budget Framework 2010-2012 (STERP II). Which was unveiled on the 23rd of December 2009.

1.3 The Budget for 2010 and STERP 11l therefore, form key anchor points around which this Monetary Policy Statement is formulated to ensure greater policy congruency and effectiveness between the Fiscal and Monetary sides.

1.4 This Fiscal-Monetary policy complementarily is essential in ensuring that both legs of the same body are moving in the same direction for the benefit of the Nation.

Core monetary policy areas.

1.5 under the current multiple currency system, which STERP 11 has clarified that it will still be with us by 2012, the Central bank will primarily focus on the following key areas, which form the nucleus of the Monetary Policy activities and priorities over the next 6 months:

A. Guarding jealously the stability of the country's financial system through pre-emptive and preventive risk-based bank supervision and surveillance approaches.

B. Ensuring the smooth functionality of the National Payment System as a direct way of supporting economic stability, recovery and progression through vibrant trade and commerce across all sectors of the economy;

C. Contingent upon the availability of resources, the bank will perform the lender of last resort function to ensure continuity and stability in the financial sector's intra-day trading activities;
D. Revival of a vibrant money market system through issuance of the management and appropriately priced financial instruments that motivate a savings culture in the economy;

E. Implementation of country's Exchange Control Guidelines and Regulations in a manner that strikes a fine balance between maximising the virtues of economic and trade liberalisation and the need to ensure that the country gets maximum value for its exports shipped out, whilst also getting full value for import payments affected at all levels in the economy;

F. Implementing the country's Bank Use Promotion and Anti-money Laundering laws;

G. As banker to government, and as is spelt out in the statutes, the Central Bank will continue to manage the country's gross international reserves position, including the holding of Special Drawings Rights (SDR) accounts at the International Monetary Fund (IMF), with Treasury charged with the actual usage of the funds therein;

H. Keeping track of the domestic and international monetary policy aggregates, interest rates, real sector aggregates and integrate these in concise macroeconomic and econometric research work that enables the Bank to continue acting as policy Advisors to Government and the generality of the economy;

I. Deployment of monetary policy instruments in an agile manner, ensuring that the banking sector plays its savings mobilisation and investment financing roles in support of government's overall macro economic policy objectives; and

J. Engaging in any other assignments government would have asked the Central Bank with, including participation in regional and international trade, economic and financial forums.

Merits of Institutional Complementarity

1.6 The above streamlined operations of the central bank are a direct result of the now generally tabled macroeconomic environment, supported by what we strongly believe to be the merits of institutional complementarity where government ministries and other public institutions are now doing what they should do.

1.7 The events of the 2004-2008 epochs were virtually all aspects of public sector policy implementation were thrust on the Reserve Bank were a survival necessity that should be avoided now and in the future through robust policy formulation and implementation across all structures of the government.

1.8 The Reserve Bank is on record saying that we will not interfere in any areas outside our statutory mandate if those responsible for those areas are doing their job.

1.9 It is against this background that the Reserve bank applauds all Principals to the Inclusive Government and the generality of fellow Zimbabweans for the renewed spirit of mutual co-operation in the common National interest.

1.10 Through working together, as Zimbabweans we will exceed even our collective expectations, ushering in rapid economic growth and social prosperity for all.

Continued adverse impact of sanctions

1.11 The Reserve Bank wishes to once again reiterate the inescapable truism that for as long as Zimbabwe remains under the hurdle of the illegal sanctions imposed on it, the fragility of the economy and the current multiple strains on its vital social sectors will be elongated over the outlook period.

1.12 This will continue to slow down the pace of meaningful resource mobilisation, investment promotion and vibrancy of the productive sectors of the economy;

1.13 It is, therefore, once again strongly recommended that the inclusive government and the Zimbabweans from all walks of life energise our call for the removal of sanctions, supported by new ways of sharpening our diplomacy on the international arena to open new doors of co-operation, whilst strengthening existing ones.

1.14 The texture and format of our domestic politics, religious intercourse, articulation of gender issues, our sensitivity to the environment, inter alia, thus shape the receptivity of the SADC region, the African Union and the world at large to our calls for investment inflows, international support and mutual co-operation in the various gainful spheres of international relations.

1.15 The current spirit of inclusiveness is therefore the most optimal path for Zimbabwe as this helps shape the necessary conducive environment for macroeconomic stabilisation, recovery, growth and well-spread development.

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