RBZ MPC targets diaspora investments, maintains tight policy |

By Alois Vinga

THE Reserve Bank of Zimbabwe (RBZ) Monetary Policy Committee (MPC) says the foreign currency inflows have hit US$9, 44 billion on the back of calls to incentivize diaspora-linked investments in the wake of increased costs of borrowing beyond the borders.

The MPC also moved to maintain a tight monetary policy in a bid to sustain the macroeconomic stability obtained in the market.

In a statement Monday, RBZ governor Doctor John Mangudya revealed the surging levels of US$ inflows into the country as evidenced by a 2,3% increase in foreign currency inflows to US$9,44 billion as at October 31 2023, compared to US$9,23 billion generated during the same period in 2022.

He said US inflows have been supported by Diaspora remittances which have consistently surpassed Foreign Direct Investment (FDI) portfolio investment and official Development Assistance since 2009 as they contributed 16% of the country’s foreign currency inflows as at October 31 2023 alone.

The revelations also come on the back of calls by market watchers for authorities to harness the revenue category to spur economic growth at a time when the cost of borrowing continues to spiral beyond reach.

“Considering the prevailing macro-economic, the MPC recommended that the government extends the fiscal and non-fiscal incentives for FDI to Diaspora Investments in the country given the primacy of remittances in the economy.

“The current Bank Policy rate at 130% and the Medium-term Bank Accommodation Facility interest rate for productive sectors, including individuals and MSMEs at 75% was maintained which rates will be reviewed in line with inflation developments from time to time,” said Mangudya.

The MPC noted that the requirement by the government in June 2023 that companies should settle an increased proportion of tax obligations on quarterly payment dates (QPDs)  in local currency created the much-needed demand for the local currency, which is critical in sustaining exchange rate and inflation rate stability.

The MPC also underscored the need for the government to continue increasing the proportion of taxes settled in local currency to sustain the optimal use of dual currencies.

“Overall the MPC remained committed to pursuing a tight monetary policy stance to safeguard the prevailing macro-economic stability and ensure that inflation expectations remained anchored in the short to medium term,” added Mangudya.

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