Bonus Payments To Civil Servants Won’t Lead to Inflation Or Affect Exchange Rate - Mushayavanhu
Reserve Bank of Zimbabwe (RBZ) Governor John Mushayavanhu has assured the public that bonus payments to civil servants and other stakeholders will not affect price stability or the exchange rate as the festive season approaches.
In an interview with The Sunday Mail, Mushayavanhu said the government has structured bonus payments in both US dollars and Zimbabwe Gold (ZiG), with the larger portion being paid in hard currency.
He said this approach should help limit any potential impact on the exchange rate. Added Mushayavanhu:
Furthermore, the Government has already budgeted for civil service bonuses, which are accommodated within Government revenues, implying no significant impact on exchange rates and prices.
Consequently, the Government is expecting substantial revenue inflows from the fourth quarter quarterly payment dates (QPDs).
In addition, the country experiences an increase in diaspora remittances as diasporans return home for the holidays. As a result, the net effect on exchange rate and prices is likely to be minimal.
Mushayavanhu said the recent policy measures aimed at addressing tight liquidity conditions have successfully reduced excess liquidity in the market and curbed speculative demand for foreign currency.
As a result, both the official and parallel market exchange rates have stabilised, with the premium between the two markets narrowing significantly. Said the central bank Governor:
The measures included increasing the bank policy rate from 20 per cent to 35 per cent, raising statutory reserves to 30 per cent and enhancing the flexibility of the exchange rate on the foreign exchange interbank market.
In addition, the increased flexibility in the willing-buyer, willing-seller interbank foreign exchange market has led to a positive response in foreign currency supply.
This has measurably contributed to currency and price stability in the economy. The Reserve Bank’s tight monetary policy stance will continue to have a positive impact and result in further narrowing.
The central bank chief said the country’s total reserves, including gold, are currently valued at approximately US$540 million, which is more than three times the reserve money, which stands at about ZiG4 billion (equivalent to US$155 million). This provides a solid reserve cover.
The total foreign reserves of US$540 million (ZiG14 billion) now exceed the total deposits in the banking sector, which are approximately ZiG12 billion (equivalent to US$467 million), Mushayavanhu added.
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