Reserve Bank of Zimbabwe Monetary Policy Committee

Monetary Policy

The Monetary Policy Committee is a team that renders an advisory role to the Reserve Bank of Zimbabwe. It is an independent board, chaired by the RBZ governor, but comprises deputy governor or deputy governors, as the case may be, deputy chairperson of the RBZ and not less than five or more than seven other persons appointed by the President in consultation with the Minister of Finance. The Monetary Policy Committee’s (MPC) mandate includes ensuring price stability and determining the limits for the Reserve Bank of Zimbabwe’s open market operations.

According to the RBZ Act, the committee should submit its findings to the board of the central bank for information purposes only. The Act also requires committee members to have sound knowledge, experience or expertise in finance, banking and fiscal or monetary policies.[1]

Background

Zimbabwe appointed a monetary policy committee (MPC) at its central bank in September 2019 as part of a set of reforms aimed at removing economic distortions and boosting confidence in policymaking, the finance ministry said. Finance and Economic Development Minister Professor Mthuli Ncube appointed a nine-member monetary policy committee (MPC) which is chaired by central bank governor Dr John Mangudya.

“The appointment of the monetary policy committee will ensure broader consultation about interest rates,” senior finance ministry official George Guvamatanga told Reuters.[2]

In terms of the RBZ Act, the committee shall be independent of the board, chaired by the governor, but comprise deputy governor or deputy governors, as the case may be, deputy chairperson of the RBZ and not less than five or more than seven other persons appointed by the President in consultation with the Minister of Finance.

Functions

The MPC’s functions entail determining the Monetary Policy of Zimbabwe; including the setting of limits on open market operations by the bank and ensure price stability as defined by the Government’s inflation target in the national budget (Fiscal Policy).

It shall also determine interest rates in line with the Government’s economic policies and targets for growth and employment creation as well as other monetary policy functions, as the finance minister may prescribe by way of regulations. According to the RBZ Act, the committee shall submit its findings to the board of the central bank for information purposes only.[3]

On 19 February 2021 the RBZ advised that the Monetary Policy Committee (MPC) was dissolved with effect from 31 January 2021 as a result of appointment of most of its members to various entities and which appointments were deemed to be in conflict with the operations of the Bank and the MPC.

Members of the Monetary Policy Committee

In September 2019 when the committee was set the following people were announced as part of the committee:

  • Dr John Mangudya, Governor & Chairman - He is an economist and the current Reserve Bank of Zimbabwe governor. Mangudya, who sits on many local and international boards .He was made RBZ governor after the expiry of Gideon Gono's term in 2014. He had been CBZ Holdings Ltd Chief Executive since April 2012 before this appointment.
  • Mr Kumbirayi Katsande - He is a Zimbabwean business executive who was the managing director of Nestle Zimbabwe Limited from 2010 and stepped down at the helm of the Swiss multinational local unit at the end of September 2014 after a four-year stint. He is Deputy Chairperson of the Reserve Bank of Zimbabwe and a member of the Monetary Policy Committee.
  • Professor Ashok Chakravarti - He is an economist and University of Zimbabwe Lecturer and a published author who has published over 15 books and journals since 1971. Professor Chakravarti is famous for making economical comments on issues affecting or related to Zimbabwe. He was once the government of Zimbabwe's economic advisor between 2010 and 2013.
  • Dr Kuphukile Mlambo, Deputy Governor - is a Zimbabwean academic and the Reserve Bank of Zimbabwe Deputy Governor.

On 20 February 2021 the Minister of Finance and Economic Development, Mthuli Ncube, announced the following additional members after the resignation and appointment of other members to positions that had a conflict of interest with the functions of the MPC:

  • Professor Albert Makochekanwa - He is a senior lecturer at the University of Zimbabwe. He has a PhD in Economics from the University of Pretoria and did his undergraduate studies at the University of Zimbabwe.
  • Persistence Elison Gwanyanya - He is a Zimbabwean economist, chartered banker, trade finance specialist and founder of Bullion Group. The company, Bullion Group, is made up of Bullion Leaf Zimbabwe, Bullion Leaf Exports, Bullion Commodities International, Bullion Traders International (South Africa), Percycon Global Fund Managers (South Africa) and Percycon Advisory Services.
  • Dr Daniel Makina - is a leading Zimbabwean economist who works at the Department of Finance, Risk Management and Banking at the University of South Africa. His research interests are FinTech, financial inclusion (Financial Inclusion in Zimbabwe) and migration economics. His current project is writing a book on financial inclusion in Africa. On 20 February 2021, he was appointed to the Reserve Bank of Zimbabwe Monetary Policy Committee.
  • Dr Charity Jinya - She is a Zimbabwean banker who was appointed as the first female Managing Director (MD) of the Merchant Bank of Central Africa Bank Limited (MBCA) (established in 1956, a subsidiary of Ned Bank Group of South Africa) in 2010. She has also served on various boards of numerous institutions and or organisations. She has been one of the numerous outstanding females in the corporate world and in 2012 she was one of the selected top 20 business personalities in the country by Megafest. She was at one time the chairman of the Institute Bankers of Zimbabwe. In 2014, she became the first vice president of the Bankers Association of Zimbabwe (BAZ). On 20 February 2021, she was appointed to the Reserve Bank of Zimbabwe Monetary Policy Committee.
  • Mrs Mathilda Dzumbunu - Mathilda Dzumbunu is a Zimbabwean entrepreneur. In February 2021 she was appointed to the Monetary Policy Committee.

Meetings

The Reserve Bank of Zimbabwe’s Monetary Policy Committee (MPC) held its inaugural meeting on 28 and 29 October 2019 at the Bank Chambers. During its deliberations, the Committee noted a number of issues that required urgent implementation for attainment of macroeconomic stability for sustainable development. In particular, the Committee focused its attention on the recent economic developments, inflation trends, cash challenges in the economy, exchange rate and foreign exchange inflows and outflows, as well as the interbank market and national payment issues.

07 January 2021

The Monetary Policy Committee (MPC) of the Reserve Bank of Zimbabwe (the Bank) met on 7 January 2021 and deliberated on measures to refine and enhance the sustainability of the Foreign Exchange Auction System. The MPC made the following resolutions in respect of surrender and liquidation of foreign exchange receipts:

  • To remove the compulsory requirement to liquidate all unutilised export proceeds after 60 days, with immediate effect.
  • To increase the Export Surrender Requirement from 30% to 40% on all export receipts, with immediate effect.
  • To maintain the liquidation requirement for domestic foreign exchange sales at 20% net of sales tax, with Authorised Dealers required to remit funds to the Bank in the currency of receipt.
  • To ensure that the allotment of foreign currency on the Foreign Exchange Auction and Interbank market continues to be guided by the priority list which places productive imports (raw materials, consumables and capital goods) ahead of foreign exchange requirements for services, education and portfolio investment.

The MPC also made the following resolutions in order to enhance the role of bureaux de change in the foreign exchange market: -

  • To reduce the portion of balances to be sold on the Foreign Exchange Auction by bureaux de change from 80% to 40% in line with the export surrender requirement for exporters.
  • To increase the maximum allowable margin on small transactions to be charged by bureaux de change from 5% to 8%.
  • To revise the daily maximum limit per transaction to US$2000 at bureaux de change level to cater for foreign exchange requirements for individuals, micro and small to medium enterprises in accordance with the foreign currency priority list.
  • To affirm that bureaux de change are allowed to purchase foreign currency from individuals and companies without limit subject to Know Your Customer (KYC) principles and anti-money laundering requirements.
  • To reiterate that all bureaux de change foreign exchange transactions shall be done through the Bank’s Bureau de Change Transaction Reporting System.

18 December 2020

The Monetary Policy Committee (MPC) of the Reserve Bank of Zimbabwe (the Bank) met today 18 December 2020 and made the following resolutions:

  • To maintain the policy rate for overnight accommodation at 35% and the medium term lending rate for the productive sector at 25%.
  • To bring forward the date of next foreign exchange auction to Monday 21 December 2020 given that Tuesday 22 December is a public holiday and that the manufacturing sector will thereafter be going on festive season shut-down.
  • To hold the next post-festive season auction on 12 January 2021.
  • To maintain the conservative monetary targeting framework in 2021 in order to sustain price stability in the economy.

The Bank takes this opportunity to express its appreciation for the manner the market embraced the foreign exchange auction system and the resultant price stability that has continued to prevail in the economy since the commencement of the foreign exchange auction system at the end of June 2020. The economy has, as a result of the foreign exchange auction system and other supportive measures taken by Government and the Bank, witnessed an increase in the production of goods and services across most of the productive sectors, especially during the third and last quarters of this year. As we journey into 2021, the Bank would like to assure the public that the foreign exchange auction system shall continue to be the anchor for the management of foreign currency in Zimbabwe and price and financial system stability shall remain the primary focus of the Bank.[4]

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References

  1. Mthuli appoints monetary policy team, Herald, Published: September 12, 2019, Retrieved: February 22, 2021
  2. [1], Reuters, Published: 11 September, 2019, Accessed: 29 January, 2021
  3. Golden Sibanda, [2], The Herald, Published: 12 September, 2019, Accessed: 29 January, 2021
  4. [3], Veritas Zimbabwe, Published: 18 December, 2020, Accessed: 29 January, 2021