Zimbabwe’s Monetary space can only be described as chaotic. And that is only looking at the last five years. Our monetary authority, the Reserve Bank of Zimbabwe, recently released its latest addition to the space, the mid-term monetary policy. The statement looks at the monetary developments over the half year and gives us direction on the approach over the next six months.

If you’ve been living under a rock, the first 59 pages of the Mid-Term Monetary Policy Statement 2023 cater to you. The usual highlights, like how inflation has been sharply reduced over the last two months, overshadow more pertinent details like that inflation peaked at all-time highs even though we are using Blended CPI. Of course, to understand the inflation position, the Report included the money supply growth and the trend clearly shows the link between money supply growth and currency depreciation.

Of course, we don’t look at these reports to see what has happened but rather what will come. In Eugene Fama’s efficient market hypothesis, all past information is contained in current prices (conditions) so our focus should rather be on what is to come. The monetary policy direction in the future had the following highlights.

Interest to be reviewed in line with inflation developments

This a sensible development from the Apex Bank if they mean exactly what the words say. Where interest rates correspond to inflation rates, we can have real interest rates and incentives for saving. Just how much this will reflect the theoretical understanding remains to be seen. After all, this is the same central bank that has “liberalized” the foreign exchange market several times in the last few years. Bank statutory reserves are to be maintained at current levels as the RBZ favors what has shown some results in the recent past.

Gold-backed digital tokens to Zimbabwe Gold Tokens ZIG

This is interesting as the RBZ plans to make digital gold tokens transactable. We will need to look into this more, but they have mentioned cards that transact based on ZIG and more. Those who hoped the digital gold tokens would be akin to cryptocurrency surely realized they hoped for too much.

Individuals may access forex but…

The bank underscored its commitment to the auction system, stating it would further liberalize the auction. Banks would be allowed process small bona fide (verified and legitimate) payments on behalf of customers. So while we may not be able to walk into banks and buy hard currency, we should be able to process foreign payments through banks.

Local financing for tobacco

Tobacco farmers who fail to secure foreign financing can raise local finance with the RBZ’s approval. This may present some good opportunities for local farmers and investors alike. However, the devil is always in the details.

Finally, the inflation outlook targets a year-on-year inflation of between 60 and 70% by the end of the year. The positive from the statement is the RBZ is less inclined to rock the boat- as it should be. The ZIG will be interesting, and we will seek updates on the operation of the gold-backed digital tokens. As for the rest of the policies, we should expect much of the same. Unless something changes.