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Monetary Policy Statement - January 2013
Gideon Gono, Governor of the Reserve Bank of Zimbabwe
January 31, 2013

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Introduction and background

We meet once again in the context of this Monetary Policy Statement which is issued in terms of Section 46 of the Reserve Bank Act (Chapter 22:15), and is presented against the background of a slowdown in economic activity, not just in Zimbabwe but the world over.

1.2 Distinguished colleagues, the deterioration in global economic conditions coupled with constraints in the domestic economy, notably the negative effects of sanctions, adverse weather conditions and underlying liquidity shortages imposed constraints on the growth of the Zimbabwean economy.

1.3 As a result of these adverse developments, significant steam has been taken off the economic growth momentum attained between 2009 and 2011 and all signs at hand point to a very difficult 2013 if we continue to operate on a "business as usual" mode.

1.4 The emerging risks are heavily inclined towards the downside, thereby significantly dimming the country's economic growth prospects. The situation has further been compounded by perennial lingering challenges which have remained deepseated in the economy over the past decade or so.

Lack of Progress in Resolving Economic Challenges

1.5 Most of you will recall participating in the shaping up of mymaiden Monetary Policy Statement issued in December 2003. In that statement, I outlined the economic challenges that we saw as affecting sustained growth and prospects of the Zimbabwean economy at that time (please refer to Appendix 1)

1.6 It is instructive that these challenges have not changed much as at 1 January 2013 except in the area of politics where the country now enjoys greater peace and tranquility than then, a product of the Inclusive Government of the last 4 years. Admittedly, lack of progress in addressing the bulk of these underlying challenges, is visible.

1.7 Notwithstanding, these attendant challenges, great scope still exist to leverage on the same strengths and advantages which I pointed out in that maiden Monetary Policy Statement in December 2003:

1.8 The strengths and positives are outlined in Appendix 2 still remain valid today and we should take advantage of them in order to move our economy to emerging market status.

1.9 Turning to the present and, on the external sector front, the Eurozone sovereign debt crisis that has plunged the global economy into a recession has also resulted in the dwindling of trade opportunities. These negative developments have precipitated the volatility of international commodity prices. Consequently, the global economic slow-down has magnified the country's external sector vulnerabilities through declining export prices, particularly for some primary commodities.

1.10 These adverse commodity price developments combined with limited access to offshore lines of credit, compound the country's external sector position with serious ramification on the vulnerability of banks.

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