ZSE | IH Monthly Snapshot Report - October 2023

In the latest sitting of the Monetary Policy Committee, they noted that the negative impact of emerging global
risks could pose significant risks to the current stability in the domestic economy. This included subdued global
growth emanating from geo-economic fragmentation and the effects of tight monetary policy, high interest rates,
credit squeeze and low international commodity prices.

As a result of softening mineral prices, the country's export receipts fell by 9% over the nine months to September
2023, from US$4.5bn during the comparable period in 2022 to US$3.6bn. In consideration of this, one of the key
changes passed with effect from 1 November 2023, is that foreign currency retentions on exports will going
forward be standardised at the level of 75% across all sectors of the economy and all special dispensations
granted to some sectors of the economy removed. The net effect of this measure is to increase foreign exchange
resources available to the Bank and Government to meet foreign exchange requirements for the settlement of
national and international obligations. In our view, this inadvertently increases the ZWL burden required to
liquidate the remaining 25% of foreign currency and potentially implies increased ZWL liquidity in the economy.

The MPC was pleased with the relative exchange rate and price stability obtaining in the economy since June
2023. Figures from ZimStat indicated further easing of annual inflation in the month of October to 17.8%, from
18.4% in the prior month. As such, the Bank Policy rate was reduced from 150% to 130% per annum. The
Medium-term Bank Accommodation (MBA) interest rate for the productive sectors including individuals and
MSMEs will be maintained at 75% per annum. Recommendations to government in the sitting were to i) remove
the Intermediated Money Transfer Tax (IMTT) on transactions that are conducted through plastic bank cards and
other digital platforms in order to reverse the level of informalization and ii) to also remove the limit of 10% trading
margin above the interbank. If passed, we believe these measures will give some reprieve especially to formal
retailers that have been struggling under an uncompetitive dual pricing system.


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