Investopedia uses cookies to provide you with a great user experience. The downturn was both sharper and more widespread than during the Global Financial Crisis. It may vary from the government, judiciary, or political parties having a role limited to only appointing the key members of the authority, or may extend to forcing them to announce populist measures (to influence an approaching election for example). Monetary authorities are typically given policy mandates, to achieve stable rise in On August 27, 2020 the Federal Reserve announced that it will no longer raise interest rates due to unemployment falling below a certain level if inflation remains low. STATEMENT ON MONETARY POLICY – AUGUST 2020 7 The economic contraction in the first half of 2020 was the most severe in decades The pandemic led to a very severe contraction in global economic activity in the first half of 2020. Monetary policy consists of the process of drafting, announcing, and implementing the plan of actions taken by the central bank, Monetary policy, the demand side of economic policy, refers to the actions undertaken by a nation's What is clear is that the Reserve Bank has limited power of these because when we talk of money supply, the major influencer is Treasury and we have also heard of the unusual concentration of money supply in 200 entities so it limits the Bank,” financial analyst, Persistent Gwanyanya weighed in.On the enhancement of production through lending to productive sectors, the RBZ set aside ZWL$ 1.5 billion to offer banks to lend during the 2020 winter farming season.This is a step in the right direction given the financing challenges local farmers are grappling with.Zimbabwe’s import dependency ratio is almost around 50 percent and enhancing food production will go a long way in mitigating the need to import basic food stuffs such as wheat and corn.This ZWL$ 1.5 billion is an addition to the ZWL$ 800 million already channeled towards the agriculture sector through the RBZ Medium Term Bank Accommodation Window.The MPS has also set new minimum bank capitalization levels revised in order to cushion banks against loses and build confidence in the local financial sector.Minimum capital levels for tier 1 banks (commercial banks)  will be in local currency equivalent of US$ 30 million, tier 2 (merchant banks, building societies etc)US$ 20 million, tier 3 (deposit taking micro finance institutions) US$ 5 million and the Microfinance institutions will have a minimum capital requirement of US$ 25 000 equivalent.The minimum capital requirements are expected to advise the Central bank on which tier they want to operate in by June 2020.On Free funds the governor emphasized that the bank has no appetite to temper with these funds as they are critical in foreign currency generation for the economy.And of course, the de-dollarization framework. However, the policy announcements are effective only to the extent of the credibility of the authority which is responsible for drafting, announcing, and implementing the necessary measures. This morning the Reserve Bank of Zimbabwe (RBZ) governor, Dr John Mangudya presented the first half, 2020 Monetary Policy Statement (MPS) amid huge expectations for remedies to soothe the increasingly anxious financial market.However, as expected the governor presented much of what the Monetary Policy Committee (MPC) has already been pre-empting in its monthly updates recently.Nevertheless, there were some little marrow left for us to digest.First, the shocking revelations that just 200 entities hold 50 percent of total bank deposits in the country is enough to conclude where the root of exchange rate manipulations emanates from.This means that out of the total ZWL$ 34.5 billion bank deposits, 200 entities hold about ZWL$ 17.25 billion at a time the entire economy is experiencing liquidity constraints.But what we digest from this is that despite the RBZ pointing out these anomalies in the economy, the Bank has proved time and again that it is unable to redress this challenge bearing in mind Dr Mangudya also revealed late last year that 50 companies then, held half of total deposits.So what could have changed now?

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