Tight monetary policy stabilizes exchange rate.

Staff Reporter

The tight monetary policy by Treasury has resulted in the stability of exchange rate and a decline in inflationary pressures.

Governor of the Reserve Bank, Dr John Mangudya said this when he met with the Monetary Policy Committee (MPC) this week.

“The MPC noted with satisfaction that a combination of the tight monetary policy stance, favorable uptake of gold coins, effective monitoring and enforcement of market discipline by the Financial Intelligence Unit (FIU) and the review and enhancement by Government of its procurement processes and practices to ensure value for money had resulted in the stability of the exchange rate and a decline in inflationary pressures,” said Dr Mangudya.

Dr Mangudya said that a cumulative total of 10 000 gold coins had been minted as at 26 August 2022.

“As at 26 August 2022, a cumulative total of 10 000 gold coins had been minted and out of which 8 076 gold coins had been distributed to the Bank`s agents for sale. A total of 6 799 gold coins had been sold as at 26 August 2022, with 75% having been bought by corporate and 25% by individuals. Ninety five per cent (95%) of the gold coins sold were purchased in local currency and the balance in foreign currency,” he said.

He highlighted that the MPC also noted a decline in month-on-month inflation from 25.6% in July 2022 to 12.4% in August 2022.

Dr Mangudya further said that the MPC resolved to maintain the tight monetary policy stance so as to ensure sustained exchange rate and inflation stability in the economy.

The MPC further resolved to maintain the Bank policy rate at 200% per annum and maintain the Medium Term Accommodation interest rate at 100% per annum so as to ensure adequate support to the productive sectors of the economy, in particular primary agriculture, agro-processing and small and medium enterprises (SMEs).