Post-poll monetary policy review this month

Godfrey Marawanyika

RESERVE Bank of Zimbabwe (RBZ) governor Gideon Gono is set to announce the fifth review of the country’s monetary policy before the end of this month.



face=”Verdana, Arial, Helvetica, sans-serif”>The review is expected to take into account the post-election scenario and drought.


The last review for 2004 was announced on January 26.


The monetary policy review will take into account the challenges which the country is facing in terms of food import requirements. In his 2005 national budget, acting Finance minister Herbert Murerwa projected economic growth of between 2 and 3,5% on the back of a 28% agricultural recovery.

This has turned out to be a mirage.


The drought which has swept across the region has forced Zimbabwe’s northern neighbour Zambia to stop maize exports.


Independent forecasts have since put the food import bill at $3 trillion.

One of the major challenges will be the containment of inflation at manageable levels in the face of sharp food price hikes and rental increases which were effected this month.


Zimbabwe’s inflation reached a peak of 622,8% in January 2004. It has since declined to about 123,7%. There are fears the trend could be reversed by negative economic fundamentals.


Despite the crisis, Gono has remained upbeat that he will be able to meet his US$3 billion foreign currency target inflows for this year.


Last month the Economist Intelligence Unit (EIU) produced a report on Zimbabwe focusing on the post-election scenario.


The EIU said it expected the country’s rate of economic decline to slow as it achieves a new equilibrium with a much lower level of income compared with levels prior to 2000.


“In particular, although many firms have now scaled down their operations to adjust to lower income levels, the collapse of commercial farming and falling government capital spending, and ongoing foreign exchange shortages will continue to create a difficult operating environment,” the report said.


“The adverse impact of the country’s HIV and Aids pandemic will also start to be felt in many sectors of the economy in coming years —notably farming and will constrain recovery,” it said.


The other challenge which the central bank will be facing is how to make underperforming parastatals contribute positively to the country’s economic recovery.


In January, Gono announced a plan to restructure non-performing public firms. He announced a $10 trillion Parastatal and Local Authorities Reorientation Programme, which will run for a period of 18-24 months.


The EIU attributed the poor performance of parastatals to “political

appointments of incompetent executives, through to blatant corruption and incorrect pricing”.


The acute shortage of foreign currency is having a telling effect on importers across the whole economy and the Homelink initiative launched by the central bank in January last year has woefully failed to generate significant inflows.

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