2020 National Budget Compels RBZ To Tighten Monetary Policy

The governor of the Reserve Bank of Zimbabwe, Dr John Mangudya has revealed that the central bank intends to tighten the monetary policy following the Monetary Policy Committee’s meeting held on Friday last week which deliberated on, among other things, the recently announced 2020 National Budget.

He said that the MPC observed the potential monetary implications of the 2020 National Budget and the liquidity situation in the economy. Mangudya added:

The committee noted that the 2020 National Budget has a potential expansionary impact on money supply, which limits the scope for tightening of monetary policy as required under the Bank’s disinflation programme.

In this regard, the Committee directed the Bank to re-calibrate the reserve money targeting framework.

The MPC also projected that the inflation rate will continue to fall hence rational to keep the overnight interest rate at 35 per cent where it was put recently from 75 per cent.

Presenting the Budget Statement, Finance Minister, Professor Mthuli Ncube projected that the monthly inflation which is currently over 30 per cent will decline to about 10 per cent by December, something which analysts said appears a bit ambitious given that the monthly rate will need to drop by more than 20 per cent.

More: The Herald