31 January 2008
In terms of Section 46 of the Reserve Bank of Zimbabwe Act Chapter 22:15, the Monetary Policy Statement is issued bi-annually, in December/January and in June/July of each year.                     JANUARY 2008 • MONETARY POLICY STATEMENT 3
CONTENTS
1. INTRODUCTION AND BACKGROUND……………………………………………. 5
SURVIVING A DECADE OF SANCTIONS… …………………………………….. 5
EXTRAORDINARY SUPPLY SIDE ……………………………………………………. 8
INTERVENTIONS…………………………………………………………………………… 8
FOOD SECURITY: The Agricultural Sector Productivity Enhancement
Facility (ASPEF) …………………………………………………………………………….. 9
RAISING FARM EFFICIENCY LEVELS: The Farm Mechanization
Programme ………………………………………………………………………………….. 10
BIO-FUELS …………………………………………………………………………………. 14
ACCESSIBILITY AND IMPACT OF BACOSSI …………………………………. 15
PROJECTS FUNDED UNDER LARP …………………………………………….. 18
2. FINANCIAL SECTOR DEVELOPMENTS…………………………………………. 29
STATUS OF THE BANKING SECTOR …………………………………………….. 29
3. EXPORT SECTOR DEVELOPMENTS……………………………………………… 36
GLOBAL EXPORT PERFORMANCE ………………………………………………. 36
TOTAL RECEIPTS ………………………………………………………………………… 39
AGRICULTURE SECTOR ……………………………………………………………… 39
MINING SECTOR ………………………………………………………………………… 44
TRANSPORT SECTOR ………………………………………………………………… 45
GLOBAL FOREIGN EXCHANGE PAYMENTS ………………………………….. 49
GLOBAL FOREIGN CURRENCY RECEIPTS……………………………………. 50
4. REAL SECTOR DEVELOPMENTS………………………………………………….. 53
GDP Growth………………………………………………………………………………… 53
Agriculture…………………………………………………………………………………… 53
Mining…………………………………………………………………………………………. 55
Manufacturing ……………………………………………………………………………… 56
Tourism Sector……………………………………………………………………………… 56
GOLD DELIVERIES………………………………………………………………………. 58
INFLATION DEVELOPMENTS ………………………………………………………. 59
Major Factors Driving Inflation ……………………………………………………….. 60
DATA COMPILATION AND PUBLICATION…………………………………….. 61                               JANUARY 2008 • MONETARY POLICY STATEMENT           4                5. MONETARY DEVELOPMENTS ……………………………………………………… 62
Money Supply ……………………………………………………………………………… 62
Money Supply Growth Trend ………………………………………………………….. 62
6. NEW MONETARY POLICY MEASURES AND FOLLOW-UP
PROGRAMMES …………………………………………………………………………… 65
FOLLOW-UPS ON ASPEF AND BACCOSSI …………………………………… 66
INTEREST RATES ………………………………………………………………………… 67
GOLD SUPPORT PRICE……………………………………………………………….. 68
CHEQUE TRANSACTIONS …………………………………………………………… 68
INDIVIDUAL FOREIGN EXCHANGE ACCOUNTS …………………………… 68
EXCHANGE RATE MANAGEMENT………………………………………………… 69
STATUTORY RESERVES PAYMENTS …………………………………………….. 69
Statutory Reserve Thresholds………………………………………………………… 70
7 CONCLUSION…………………………………………………………………………….. 71
JANUARY 2008 • MONETARY POLICY STATEMENT 5
1. INTRODUCTION AND BACKGROUND
1.1 As is stipulated in the Statutes, this Monetary Policy Statement is issued in terms of Section 46 of the Reserve Bank of Zimbabwe Act [Chapter 22:15].
1.2 Consistent with the mandate prescribed by the above statute, Monetary Policy Statements provide the Nation with a detailed assessment of the status of the economy; introduce policy interventions to address attendant constraints; as well as proffer advice to Government, the Business Community, Labour and Civil Society in general on how best to deal with our economic circumstances.
SURVIVING A DECADE OF SANCTIONS…
1.3 As we forge ahead with various turnaround policy initiatives, our Great Country has amply demonstrated the UNIQUE RESILIENCE of its people and economy in the face of virtually a decade of sanctions.
1.4 An assessment of global capital flows into the developing world, sub-Saharan Africa in particular, clearly shows that considerable attempts are being made to dismantle Zimbabwe’s economic fabric through a combination of the following armoury:
(a). The freezing of most donor-supported programmes;
(b). Withdrawal of commercial external lines of credit;
JANUARY 2008 • MONETARY POLICY STATEMENT 6
(c). Withdrawal of balance of payments support by multilateral financial institutions, such as the IMF and the World Bank;
(d). The passing by some countries of legislations that prohibit trade and financial relations with Zimbabwe; and
(e). The denial of Zimbabwe’s access to the Global Fund for health-related programmes on the back of purely political considerations, leaving millions suffering through the ailments of HIV/AIDS, malaria and tuberculosis.
1.5 The subtle nature of some of these sanctions has regrettably escaped the eyes of some stakeholders here at home and many others in the world community who instead are interpreting Zimbabwe’s current difficulties as a product solely of domestic policy imbalances.
1.6 Ordinarily, however, like any other Central Bank the world over, we see the arrows and spears as they seek to shoot our economy, and in defence, have been and will continue to deploy extraordinary interventions to meet the extraordinary circumstances we are in.
1.7 The impact of the decade under sanctions has also clearly taught us that as a Nation, our survival depends predominantly on our own internal capabilities in the areas of food self-sufficiency; stability of the energy sector; foreign exchange generation; robust railway, telecoms and road network systems; smooth functionality of all our public enterprises and local authorities; and cohesive coordination of work processes across strategic national institutions.                       ANUARY 2008 • MONETARY POLICY STATEMENT 7
1.8 Indeed, the relentless evil intentions by those imposing sanctions against our Nation have taught us that we need to be better organised as one force, encompassing Government, Labour, Business and Civil Society.
1.9 It is for this reason that we have made repeated calls for stakeholders to close rank and marshal an amicable and inclusive Social Contract as the ultimate bridge towards macroeconomic stabilisation.
1.10 Some would want to simply look at our current high levels of inflation, foreign exchange shortages and other constraints and bay for the blood of the Central Bank Governor, but the substance of the matter is that without innovativeness and thinking and acting outside the box, things could have been worse under the decade-long spell of sanctions.
1.11 We should, therefore, not mourn and beat ourselves into extinction, failing to see the silver-linnings and achievements we have collectively registered as a People albeit in the midst of seas of global adversity. JANUARY 2008 • MONETARY POLICY STATEMENT 8
EXTRAORDINARY SUPPLY SIDE
INTERVENTIONS
1.12 As a direct strategy against the adversity of sanctions, the Reserve Bank’s thrust in 2007 was anchored on the overriding objective of evoking positive supply side response through implementation of extra-ordinary measures.
1.13 In the year 2007, the Reserve Bank successfully introduced and implemented the following economic support facilities which were meant to stimulate the supply side of the economy and increase capacity utilization among other objectives:
(a) Agricultural Sector Performance Enhancement Facility (ASPEF),
(b) Farm Mechanization Programme,
(c) Operation Food Security,
(d) Cattle Herd Restocking Programme,
(e) Seed Development Programme,
(f) SMEs Development Programme,
(g) Rural Business Facility,
(h) Tourism Development Facility,
(i) Bio-fuels and
(j) Basic Commodities Supply Side Interventions (BACOSSI).                     JANUARY 2008 • MONETARY POLICY STATEMENT 9
FOOD SECURITY: THE AGRICULTURAL
SECTOR PRODUCTIVITY ENHANCEMENT
FACILITY (ASPEF)
Facility Utilization
1.14 As at 04 January 2008, a cumulative amount of $62.2 trillion had been disbursed under ASPEF to 25 477 applications.
1.15 Over 90% of the fund was directed to tobacco, other crops and livestock, beef, piggery, poultry and support to the horticultural sub-sector.
1.16 Limited access to credit had become the most binding constraint to new farmers, as they sought to firmly establish themselves on the ground.
1.17 Without finance no farmer can make meaningful contribution to the country’s virtuous goal of food self-sufficiency.
Operation Food Security (MAGUTA)
1.18 The total amount disbursed towards Operation Food Security Programme as at 31 December 2007 totalled, $3.038 trillion, mainly to support the 2006/7 and 2007/8 summer programmes.             JANUARY 2008 • MONETARY POLICY STATEMENT 10
RAISING FARM EFFICIENCY LEVELS: THE FARM MECHANIZATION PROGRAMME
1.19 With Land in the hands of the people, consistent with Government Policy, the next logical strategic step was to elevate farm efficiency levels through mechanisation.
1.20 It is for this reason that the Reserve Bank procured agricultural equipment, which includes combine harvesters, tractors and other farm implements under the Farm Mechanisation Programme, Phases I and II.
1.21 The Phases I and II were officially launched by his Excellency, the President, Cde R.G. Mugabe on 11 June 2007 and 8 October 2007 respectively.
1.22 Phase III of this on-going Agricultural Sector Mechanisation Programme, together with Phase 1, of the Electric Generator Programme (EGP), conceived by His Excellency The President in June 2007, will be launched during the month of February 2008. Details of these strategic programmes will be announced in due course.
1.23 Clearly demonstrating that where there is unshackable will-power there is always a way, Phases I and II, of the Mechanisation programme saw the following machinery and equipment being injected in the country’s agricultural sector:       JANUARY 2008 • MONETARY POLICY STATEMENT 11
Summary of Equipment Delivered under Phase I and II   Type of Equipment Delivered Quantity
Combine Harvesters 85
Tractors 2 125
Ploughs 1 386
Harrows 1 263
Planters 371
Boom Sprayers 541
Vicon Fertilizer Spreaders 378
Animal Drawn Scotch Carts 45 000
Animal Drawn Cultivators 20 000
Animal Drawn Planters 1 000
Animal Drawn Plough 50 000
Chains 200 000
Knapsacks (Chemical sprayers)Â 70 000
Animal Drawn Harrows 70 000     Cattle Herd Restocking Programme
1.24 The Reserve Bank, through Fiscorp (Pvt) Ltd has also put in place the National Cattle Herd Rebuilding Programme.
1.25 The main objective of the facility is to increase national cattle herd by 2.1 million within the next 3-5 years. Work is already underway on this programme, which also directly addresses the food element in our inflation basket.                     JANUARY 2008 • MONETARY POLICY STATEMENT 12
Seed Development Programme
1.26 In line with one of the key thrusts of the country to be food self-sufficient, a $495 billion facility was put in place to promote seed development programmes.
1.27 As at 08 January 2008, a total of $469.9 billion had been disbursed and the following tonnages of seed purchased by the seed companies:CROPÂ TONNAGE
Maize 17 411
Soyabeans 7 709
Sugar beans 15. 8
Sorghum 110.9
Cowpeas 104.1                         Dairy Support Programme
1.28 The objective of the Dairy Support facility is to ensure viability at farm level, increase throughput to dairy processors, as well as stimulate growth in the dairy farming sector in general.
1.29 As at 5 January 2008, a total amount of $2.196 trillion had been disbursed under the facility. JANUARY 2008 • MONETARY POLICY STATEMENT 13
$1.5 trillion Women and Youth SME Facility
1.30 The facility was put in place in order to promote economic empowerment of women and youth through the provision of both working capital and capital expenditure requirements for projects and to curb rural to urban migration.
1.31 The maximum loan size for each project is $1 billion and as at 08 January 2008 a total amount of $227 billion had been disbursed to support 280 projects. This support was over and above that extended to the SME sector.
1.32 As at 30th October 2007 the Small and Medium Enterprises Revolving Facility had been fully utilised to support 3 056 projects
Rural Business Facility
1.33 The Rural Business Facility which was launched on 1 October 2007, is targeted at the following:
(a) Wholesalers serving rural retailers;
(b) Retail Shops;
(c) General Dealers;
(d) Hardware Shops;
(e) Butcheries buying from licensed abattoirs.
1.34 To date, a total of $4.0 trillion was approved for the wholesalers and a total of 2990 retailers will be restocked under this programme.                           JANUARY 2008 • MONETARY POLICY STATEMENT 14
Tourism Development Facility
1.35 The Tourism Development Facility was initiated to enhance the tourism industry’s foreign currency generation capacity through funding of capacity expansion projects.
1.36 As the country works to prepare for the 2010 World Cup Games, more coordinated programmes of action need to be implemented to present a comprehensive face-lift to the country’s tourism industry.
BIO-FUELS
1.37 A bio-diesel plant with a medium term capacity of 90-100 million litres of diesel annually was officially launched in November 2007 as a joint venture between the Reserve Bank and Korean partners.
1.38 The Reserve Bank, through Fiscorp, is currently funding two other bio-fuel projects namely Finealt Engineering (Pvt) Ltd and Verify Engineering (Pvt) Ltd, both of which are expected to further boost the import-substitution programme.
1.39 With greater stability in the fuel sector, the country’s overall production chain’s vulnerability to the exogenous shocks of erratic supplies will be mitigated.  JANUARY 2008 • MONETARY POLICY STATEMENT 15
Basic Commodities Supply Side Intervention Facility (BACOSSI)
1.40 In line with the Mid-Term Monetary Policy Review Statement of 1 October 2007, the Reserve Bank established the Basic Commodities Supply – Side Intervention Facility (BACOSSI) aimed at boosting production through targeted financial support to producers of basic commodities.
1.41 For the economy to fully benefit from these initiatives, our farmers must take up the challenge and utilise every inch of arable land to maximise the production of oil seeds enough for consumption and supplies for bio-fuels.
ACCESSIBILITY AND IMPACT OF BACOSSI
1.42 As at 08 January, 2008 a total of US$13.5 million and ZW$18.6 trillion had been disbursed under the facility.
1.43 Monitoring of the first beneficiaries is on-going, with greater focus on price-stability, output growth, employment preservation and creation, capacity utilisation and export expansion.
1.44 The BACOSSI facility has gone a long way in restoring productivity for beneficiary manufacturers and retailers, some of which were on the brink of closure due to high production and delivery costs.    JANUARY 2008 • MONETARY POLICY STATEMENT 16
1.45 Major suppliers of basic commodities such as National Foods, Blue Ribbon Foods, Lobels, Schweppes, Cottco, Star Africa, Olivine, Unilever SEA, Cairns, Nestle, Circle Cement and others have seen capacity utilization improving from as low as 10% to as high as 65% on the back of BACOSSI funding.
1.46 BACOSSI, itself, a crisis management intervention in the aftermath of the mid-2007 price blitz, must however, not be seen as a permanent feature of our Monetary Policy interventions. Instead, this facility was meant to act as an emergency shock-absorber to foreclose the possible collapse of companies which could not restock their production systems or retail outlets.
Local Authorities Reorientation Program
1.47 Another dimension of the extraordinary measures the Reserve Bank had to take was the Local Authorities Re-orientation Programme (LARP). This programme financed construction and rehabilitation of key infrastructure as well as income generating projects for the country’s local authorities sector.
1.48 LARP financed water projects in Gweru, Ruwa, Norton, Chegutu and Makonde Mhangura. Improvement in water supplies in these local authorities has enabled them to attract and retain investments in the towns.
1.49 Local Authorities that invested in income generating projects include: Gwanda, Harare, Gutu, Guruve, Mutoko and Goromonzi. These are enjoying significant benefits of increased revenues.                      JANUARY 2008 • MONETARY POLICY STATEMENT 17
1.50 LARP also financed the construction of houses and servicing residential stands in Kadoma, Victoria Falls, Umzingwane and Masvingo.
1.51 More than 1 300 houses and stands were funded under LARP. This is set to alleviate the Country’s housing shortages and dampen the current inflationary pressures the country is experiencing.
1.52 Local Authorities that have embarked on computerization projects include: Kwekwe, Ruwa, Bikita, Bulawayo and Gwanda. The computerization projects have significantly improved their billing, accounting and cashflow management systems.
1.53 The Table below summarizes the benefits of LARP intervention since its inception in 2005.    JANUARY 2008 • MONETARY POLICY STATEMENT 18
PROJECTS FUNDED UNDER LARP Â Â Â LOCAL AUTHORITYÂ PROJECTÂ PROJECT BENEFITS
CITY OF HARARE Quarry, Clamping, Pest Controlʉۢ Quarry station project assisting City’s road patching and Housing projects.
• Vehicle clamping project has restored traffic order in the City.
• Pest Control project has improved City’s health delivery as well as increased the City’s revenue.
CITY OF BULAWAYOÂ Vending Bays
and Computerization ʉۢ Accurate and timely billing/bills.
• Promotion of small and medium enterprises.
• Enhanced revenue collection.
CITY OF GWERU Water And Sewer  â€¢ Project has reduced water losses through leaks from a maximum of 40% of water production to 15%.
CITY OF MASVINGO Stand Servicing â€¢ The 360 stands serviced are set to alleviate housing shortages in Masvingo.
CITY OF MUTARE Water  â€¢ Project has improved the billing system of the Council and enhanced its revenue collection.
• The reservoir constructed improved water availability in the city throughout the day and year.
RUWA T C Computerization â€¢ The new water treatment plant has increased water supply in Ruwa from 25% of daily requirements to 75%.
MARONDERA MUN. Cattle Rearing â€¢ Improvement in provision of safe water for domestic use
• Cattle project bringing in new revenue for Council.
GOROMONZI RDC Poultry Project â€¢ Improved revenue generation
• Increased employment.
MUTOKO RDC Factory Shellsʉۢ Improvement in Mutoko RDC’s revenue base.
• Project promotes investment and operations of SMEs.Â
JANUARY 2008 • MONETARY POLICY STATEMENT 19                              MAKONDE RDC Water Augmentation â€¢ Attraction of investments to the local authority
• Improved health delivery for residents,
• Improved revenue collection.
NORTON T C Water Augmentation â€¢ Improved water supply.
• Attraction and retention of investments.
GURUVE RDC Piggery And Citrus â€¢ Extra revenue for the RDC.
• The project has boosted employment in Guruve.
CHIRUMANZI RDC Irrigationʉۢ The project has improved the RDC’s revenue.
• The project is in line with food security and self sufficiency initiatives.
VIC FALLS MUN. Stand Servicing â€¢ The 717 stands to be serviced will alleviate housing shortages in the town.
• Expansion of Councils’ revenue base
UMZINGWANE RDC Stand Servicing â€¢ Projects will result in an additional 150 housing units being added to the current housing stock.
• Expansion of Council’s revenue base.
• Temporary employment creation – 15 casual workers employed on the project.
BEIT BRIDGE RDC Water â€¢ Increase in water exports to South Africa from 5 000m3 to 6 500m3 per month .
• Increased revenue generation and collection to the tune of ZAR 250 000 per month.
GWANDA MUN. Brick Moulding and Computerization â€¢ Improved income generation.
• Billing now timely and accurate.
• 9 jobs created by brick molding project.
GUTU RDC Abattoir â€¢ Project created 11 new jobs.
• Council realizing additional income from increased number of cattle using the abattoir.
• Abattoir also providing a social service- reduced number of incidence of stock thefts and hygienic conditions of slaughter of animals now prevailing
 costs due to efficiencies arising from computer system compared to manual one.
• Improvement in revenue collection and billing. Timely and accurate financial reports now available.
MWENEZI RDC Grinding Mills â€¢ Additional income for the Council.
• Reduced transport costs by the community in traveling to other business centers for mills.
BUHERA RDC Poultry Project â€¢ Project realized additional income from chicken sales.
• 11 permanent posts were created as a result of this project.
MUN OF KWEKWE Computerization â€¢ New system improved debtor collection from 60% of debtors being over six months old to 10%.
• High speed data transmission.
• More data storage that caters for expansion of Kwekwe.
• Timeous statements production by Kwekwe
MUN OF CHEGUTU Civil Works and Equipment â€¢ The ambulance has improved health delivery system in Chegutu.
• The dumpers are assisting in refuse collection and will ensure improved sanitation in Chegutu
SHURUGWI T/BOARD Brick Moulding â€¢ Extra revenue for Shurugwi Town
• The project assists in housing construction in Shurugwi and Gweru.Payments for Food Imports
1.54 As part of its extraordinary interventions, the Reserve Bank also mobilised a total amount of US$142.2 million, for food imports to bridge internal shortages. This was a 24.5% increase, compared to 2006 total expenditure of US$114.2 million, which went towards food imports in that year.Â
JANUARY 2008 • MONETARY POLICY STATEMENT 21
Food Imports: US $millions
Payments for Fuel Imports
1.55 Through the National Oil Company of Zimbabwe, the Reserve Bank also procured fuel amounting to US$312.2 million. This translates to a 130.6% increase on the 2006 expenditure.
1.56 With US$312.2 million having been spent on fuel alone in 2007 over and above that spent through Direct Fuel Imports (DFI) arrangements, it is apparent that Zimbabwe is among the hardest hit economies on the back of the sharp increase in international fuel prices.
1.57 It is for this reason that the Central Bank is strongly driving the development of a vibrant bio-fuels sector in the country.                JANUARY 2008 • MONETARY POLICY STATEMENT 22
1.58 In implementing all these extraordinary interventions, it is the Reserve Bank’s modest contribution to what has to be a collective National Agenda.
1.59 Ultimate stability, recovery, economic growth and prosperity only comes as an end-product of all-round collaborative efforts by all sectors of the economy.
1.60 From the standpoint of assured business viability, our Business Sector must assist through increased capacity utilisation and reasonable price adjustments.
1.61 On the part of Government, greater focus should continue to be placed on ensuring that the operating environment and the rules of play promote stable and positive expectations on the sustainability of gainful economic enterprises.
1.62 A flourishing business environment has to be anchored on the back of a viable incomes and pricing framework, supported by smooth functionality of key public institutions and infrastructure systems.
1.63 Under the prevailing conditions of high inflation, any interventions that fall short of activating the actual supply of goods and services on the market will be scratching on the surface, without providing long-term solutions.                 JANUARY 2008 • MONETARY POLICY STATEMENT 23
1.64 It is for this reason that as Monetary Authorities, our primary focus remains that of anchoring price stability and inflation reduction on the back of increased economic productivity supported by cautious demand management measures.
1.65 The effectiveness of such supply side interventions is however, directly correlated to the degree and extent to which stakeholders deploy the resources towards the intended purposes.
1.66 Where others re-route to parallel markets diesel meant to power tractors in the fields, or siphon ASPEF and BACOSSI funds into the foreign exchange parallel market, the direct result is that the expected supply response is defeated, whilst inflationary credit expansion surges.
1.67 It is for this reason that over the outlook period, greater scrutiny is being done to certify that beneficiaries of well-meant support programmes do not perpetuate economic crises through diversionary practices.
Policy Advice…
1.68 Since 18 December, 2003, the Reserve Bank issued acres and acres of policy advice, to Government Ministries, Local Authorities, Parastatals and the Business Community, to underscoring what needed to be done to realign the economy back on the rails of success.                               JANUARY 2008 • MONETARY POLICY STATEMENT 24
1.69 The non-implementation of some of the Policy Advice given to stakeholders especially to Government Ministries, Local Authorities and parastatals remains a sore point for Monetary Authorities as, in the process of filling that gap, the Bank has found itself having to carry the above-mentioned extra-ordinary responsibilities outside its normal core business simply to keep Zimbabwe fed, to keep Zimbabwe oiled and to keep Zimbabwe afloat in terms of certain local and international financial obligations.
1.70 Along with this Monetary Policy Statement, we have once again published a separate Supplement presenting a full alphabet of this advice and advance warnings we gave the Nation on the risks of non-implementation of key policy decisions.
1.71 As we enter the dawn of the forthcoming combined elections, work is already underway to crafting a robust Post Elections Economic Blue Print that will anchor a lasting foundation for price stability, inflation control, investment promotion, as well as revamping the general productivity levels in the economy.
1.72 In the meantime, however, it is imperative that our economic policies and interventions guard against the risks of accelerated economic distortions if such programmes haphazardly impair business viability, investor confidence and the sanctity of private property rights.                      JANUARY 2008 • MONETARY POLICY STATEMENT 25
1.73 Specifically, through the work of the National Incomes and Pricing Commission (NIPC), extreme caution should be exercised to ensure that this does not degenerate into yet another unintended catastrophic blitz exercise and fight between Government and business that impairs business operations and breed a spirit of mistrust among stakeholders.
1.74 Our recommendation and advice is that the NIPC confines its operations around the 3 controlled products and the 16 nationally agreed products on the monitoring list, and not concern itself with tourism products, air travel, entertainment, beer and other product prices.
1.75 Through this focussed approach, the full machinery and expertise of NIPC will be concentrated for maximum beneficial impact, as opposed to the potential risk of this key institution being spread too thinly across too many products, regions and markets, in the end degenerating into a vehicle of disruptive distortions.
1.76 On the part of business, our sincere advice is to avoid profiteering in whatever they do and stick to the laws of the land however business may disagree with those laws especially on the exchange rate issue. JANUARY 2008 • MONETARY POLICY STATEMENT 26
The 2010 Games…
1.77 In just two years from now, the whole world will converge in Southern Africa for the 2010 World Cup Soccer Games.
1.78 As a country, we cannot afford the world to congregate in Southern Africa with our economy being an eyesore among the 14 SADC countries, let alone the eyesore in the whole of Africa in terms of the prices of its goods and services; misaligned exchange and multiple and interest rates; unreliable supply of Municipal utilities, electricity, liquid fuels and coal; inadequate supply of food supplies; rampant corruption; indiscipline and mistrust across the board and the absence of economic patriotism on the part of some Zimbabweans.
Post Elections Reforms…
1.79 The Post Elections Monetary Policy Blue Print will encompass a 24 month basis for recovery, running from May, 2008, through to April 2010 and will dovetail into other Government Fiscal and Economic blue prints under preparation by the relevant economic and sector Ministries.
1.80 As Monetary Authorities, we have chosen a silent issuance of this Monetary Policy Statement for strategic reasons whilst we prepare for the post-elections policy programme.                             JANUARY 2008 • MONETARY POLICY STATEMENT 27
Economic Imperatives Programme
1.81 Our economic imperatives programme, post elections in March 2008, will need to focus on and address:
a) Removal of Economic pricing distortions in areas such as fuel, agricultural inputs and outputs, multiple interest and exchange rates, electricity, water and other municipal; and parastatals service delivery charges.
b) Subsidies Policy: to remove untargeted general subsidies in favour of targeted and specific subsidies.
c) Promotion of inward investment from across the globe, with bias towards the East, in line with Government’s Look East Policy but without excluding desirable investment which meets the country’s criteria from other investors.
d) Re-modifying investment laws; protection of investment; respect for private property and implementing a sustainable indigenization framework.
e) Finding common ground for the immediate and long-overdue lifting of sanctions against the country and securing Balance of Payments Support from willing and cooperating partners.
f) Uplifting productivity through incentives in Mining, Agriculture, Tourism, Manufacturing and other primary and tertiary sectors of the economy.                           JANUARY 2008 • MONETARY POLICY STATEMENT 28
g) Infrastructure development in the mining, transport, energy and agricultural sectors.
h) Building stronger international relations.
i) Arresting brain drain through skills development and retention programmes.
1.82 Together as a Nation we can all do it!
1.83 The various innovative programmes, interventions and sacrifices that we have made as a country are investments that should now start to bear positive fruits beginning this year, supported by comprehensive policy reforms and implementation of needful structural adjustments in our economic systems. JANUARY 2008 • MONETARY POLICY STATEMENT 29
2. FINANCIAL SECTOR DEVELOPMENTS
STATUS OF THE BANKING SECTOR
2.1 Whist in general, the Banking Sector continued to exhibit stability, the industry has been showing disturbing signs of relapsing into the indiscipline and imprudent behaviours as seen in 2003/2004.
2.2 The Reserve Bank is, however, taking swift corrective measures to make sure that the adversities of such imprudent practices do not expose the entire financial sector into systemic imbalances
2.3 During the last quarter of 2007, the Reserve Bank prescribed additional disclosure requirements as part of its on going efforts to enhance market discipline in the financial sector.
2.4 All banking institutions and asset management companies are required to disclose the most recent on-site Capital, Asset Quality, Management, Earnings, Liquidity and general Stability and Solvency (CAMELS) and Risk Assessment System (RAS) ratings, as well as their ratings assigned by accredited Credit Rating Agencies, in their published annual financial statements.
Banking Institutions…
2.5 There were twenty-eight (28) banking institutions comprising of fourteen (14) commercial banks, five (5) merchant banks, four (4) discount houses, four (4) building societies and one (1) finance house, operating in the financial sector as at 31 December, 2007.Â
JANUARY 2008 • MONETARY POLICY STATEMENT 30
Asset Management Companies…
2.6 Seventeen (17) asset management companies were operating as at 31 December, 2007.
2.7 The Asset Management sub-sector remains an overtraded one and some institutions within the sector are no longer conducting core business. An analysis of the sub-sector’s income statements shows that there is resurgence in the tendency by some institutions to rely heavily on income from non-core business. Incomes and investments under management are not sufficient to sustain operations.
2.8 Over the past two years, the Central Bank has been calling for asset management companies to consolidate their businesses but only a few institutions have heeded the call.
2.9 Once again, we implore institutions in the sub-sector to take-up this advice or risk losing their asset management licences on the back of inadmissible dealings.
2.10 In light of the above, the moratorium on the licensing of new asset management companies remains in force.
2.11 The Reserve Bank will continue to monitor the sector closely and will take prompt corrective measures where appropriate.    JANUARY 2008 • MONETARY POLICY STATEMENT 31
Microfinance / Moneylending Institutions…
2.12 To date, the Reserve Bank has registered 309 microfinance/moneylending institutions. The institutions have in excess of 380 branches countrywide. The licensing of microfinance/moneylending is ongoing and their operating licences are renewed annually in line with the provisions of the Moneylending and Rates of Interest Act.
Establishment of a Credit Reference Bureau
2.13 The Reserve Bank, in collaboration with the Bankers Association of Zimbabwe (BAZ) and Building Societies Association, is setting up a Credit Reference Bureau.
2.14 The Credit Reference Bureau will warehouse valuable credit information on individual and corporate entities’ borrowing history and their repayment patterns to facilitate ease access of information for the enhancement of credit risk assessment and management by banking institutions.
2.15 By providing a better and more accurate knowledge of every borrower’s credit quality and by facilitating appropriate analysis of their creditworthiness, the Bureau will foster greater transparency and easier access to the credit market on better terms.        JANUARY 2008 • MONETARY POLICY STATEMENT 32
2.16 This contributes to raising the stability of the financial system as a whole. The information contained in the Bureau shall constitute one of the most important available mechanisms to address some of the validation, benchmarking and modelling issues that Basel II requires.
2.17 Thus, through the Bureau, the Reserve Bank can help the banking institutions in the progressive adoption of the advanced credit risk measurement approaches advocated under Basel II.
2.18 From a broader perspective, the collection of credit information and the access to it plays an important role in supporting the mechanics of finance, banking and business, and the stability of the economy.
Progress on Basel II Implementation
2.19 As I indicated in the Monetary Policy Review of the 24th January 2006, the Reserve Bank has adopted the revised framework of the International Convergence of Capital Measurement and Capital Standards (also known as Basel II framework).
2.20 The Basel II capital accord provides a comprehensive and more risk-sensitive capital allocation methodology.
2.21 As Monetary Authorities, we confirm that the Reserve Bank long embarked on a gradual approach to Basel II implementation since 2004 in order to allow for a smooth transition to the new approaches. JANUARY 2008 • MONETARY POLICY STATEMENT 33
2.22 To date and in line with Basel II requirements, our banking institutions are required to allocate capital for market and operational risk.
2.23 As part of the Basel II implementation process, the Reserve Bank has issued out the following guidelines: Guideline No. 01-2007/BSD: SPECIAL PURPOSE VEHICLES, SECURITISATION & STRUCTURED FINANCE and Guideline No. 02-2007/BSD: CONSOLIDATED SUPERVISION FRAMEWORK.
2.24 As Monetary Authorities, we urge banks to prime their structures, systems and processes to allow for smooth transition in the implementation of Basel II.
Disclosure Requirements
2.25 Mindful of the existing gaps between disclosure practices and requirements under market discipline (Pillar III) of Basel II, and as part of its ongoing efforts to promote financial stability and enhance market discipline, the Reserve Bank has developed a set of minimum financial disclosure requirements.
2.26 To this end, the Financial Disclosure Guideline will be issued to the market by 28 February 2008.
2.27 The Guideline is part of the Reserve Bank’s ongoing efforts to promote adequate transparency in financial institutions. Transparency strengthens confidence in the banking system by reducing information asymmetry between banks and their clients.          JANUARY 2008 • MONETARY POLICY STATEMENT 34
Financial Inclusion
2.28 In the January 2007 Monetary Policy Statement, the Central Bank unveiled the Financial Inclusion Framework whose main objective was to facilitate eradication of financial exclusion and increase access to financial services by all Zimbabweans, particularly the rural marginalised populace.
2.29 In this regard, a National Microfinance Policy, which articulates at the National level, our vision and strategy for the development of the microfinance industry in Zimbabwe, will be issued in due course
Expansion of Branch Networks…
2.30 Pursuant to the provisions of the Financial Inclusion Framework of January 2007, the banking sector has made tremendous efforts in combating financial exclusion through increase in the provision of financial services to the previously unbanked or marginalized communities.
2.31 To date, six banking institutions have opened a total of thirty-seven (37) branches, twenty-two (22) agents and five (5) mobile units countrywide as indicated in the table below:                               JANUARY 2008 • MONETARY POLICY STATEMENT 35
Additional Bank Branches  INSTITUTION NO. OF NEW BRANCHES OPENED  LOCATION
Agribank 2 new branches Chibuwe, Kwekwe
 4 National Banking offices refurbished into fully fledged branches Mtoko, Checheche, Nyika and Chivhu
ZIMPOST 2 new branches Lususlu, Chiendambuya
 18 postal outlets 2 per province excluding Harare
POSB 5 new branches Zvishavane, Centenary, Bindura, Karoi, Gokwe
 5 new mobile units Masvingo, Chimanimani, Mtoko, Hwange, Mt. Darwin
Barclays 11 branches Chitungwiza, Nkulumane, Westgate, Borrowdale, Msasa, Gokwe, Byo L. Takawira, Highfield, Makoni Shopping Centre, Chinhoyi
CBZ 13 branches Chirundu, Karoi, Kariba, Chinhoyi,Beitbridge, Nyika,Chimanimani, Chipinge, Muzarabani, Mt. Darwin, Lupane, Plumtree, Murehwa
CFX Bank 2 branches Ngezi, Vic. Falls
ZABG 1 branch Mtoko,
ZB Bank 1 branch Triangle              2.32 As Monetary Authorities, we continue to urge banking institutions to deepen this noble programme by opening more branches in rural and peri-urban areas in order to stimulate economic activity.          JANUARY 2008 • MONETARY POLICY STATEMENT 36
3. EXPORT SECTOR DEVELOPMENTS
GLOBAL EXPORT PERFORMANCE
Shipments
3.1 For the year 2007, total export shipments amounted to US$1,680,393,200.49 representing a 9.6% increase over the previous year, which recorded US$1,533,150,097.84.
Total Monthly Export Shipments (US$)                      Month  2005 2006 2007 2007 – 2006 % Change
January  111,847,392.34 111,654,853.12 180,460,441.70 61.62
February  164,931,372.64 103,376,167.75 115,767,448.60 11.99
March  126,249,086.94 133,267,963.89 135,155,197.27 1.42
April  139,782,976.79 93,612,310.71 109,088,447.42 16.53
May  144,237,766.29 134,157,125.38 154,131,705.45 14.89
June  141,415,754.46 131,323,449.45 141,935,998.63 8.08
July 116,648,044.38 125,483,887.79 156,562,752.46 24.77
August 120,236,356.78 152,510,435.67 125,873,052.92 (17.47)
September 173,246,720.87 121,633,189.42 104,961,691.04 (13.71)
October 127,465,953.33 138,845,849.18 146,178,219.31 5.28
November 147,857,965.01 168,478,998.57 178,480,928.28 5.94
December 99,576,547.72 118,805,866.91 131,797,317.41 10.94
Total  1,613,495,937.55 1,533,150,097.84 1,680,393,200.49 9.60
JANUARY 2008 • MONETARY POLICY STATEMENT 37
Shipments for the Years 2005 – 2007
Export Performance by Sector for the Year 2007 (US$ Sector 2005 2006 2007 2007 – 2006 % Change
Agriculture 249,310,331.87 215,984,268.98 224,051,998.67 3.74
Horticulture 43,215,928.05 32,202,479.21 30,225,737.66 (6.14)
Hunting 10,000,000 12,081,799.93 12,873,313.00 6.55
Manufacturing 306,317,854.23 290,862,892.15 282,822,486.46 (2.76)
Mining 733,124,979.54 702,220,177.96 849,591,280.54 20.99
Tobacco 281,522,898.86 279,798,479.61 280,828,384.16 0.37
Total 1,613,493,997.55  1,533,152,103.84  1,680,395,207.49  9.60Â
JANUARY 2008 • MONETARY POLICY STATEMENT 38
Sector Contributions to Export Shipments
3.2 The mining sector continued to lead in shipments in the year 2007, contributing 50% to the total shipments, compared to 46% during the year 2006, followed by tobacco and manufacturing, tied at manufacturing 17%.              JANUARY 2008 • MONETARY POLICY STATEMENT 39
TOTAL RECEIPTS
3.3 The Table below shows the total export acquittals indicating that US$1,573,011,265.691was acquitted in the year 2007, compared to US$1,260,853,122.99 in the year 2006, representing a 24.76% increase.
Total Export Acquittals (US$) Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â 2005Â 2006Â 2007Â 2007 – 2006 % Change
January 134,710,401.46 141,078,531.08 178,318,932.08  26.40
February 123,353,790.84 128,368,443.68 182,014,804.68  41.79
March 103,760,728.42 90,830,428.52 118,915,088.17  30.92
April 123,156,412.05 74,496,470.40 123,379,095.27  65.62
May 98,047,222.58 113,057,959.43 145,379,491.79 28.59
June 68,512,785.30 116,123,182.17 132,732,688.70 14.30
July 161,300,560.26 66,341,316.43 95,825,758.83 44.44
August 111,849,091.61 65,075,610.23 144,294,848.25 121.73
September 142,959,192.04 163,334,019.65 87,747,902.07 =(46.28)
October 100,047,198.37 84,709,776.07 78,350,330.28 (7.51)
November 101,585,488.87 126,704,137.98 155,769,345.97 22.94
December 74,086,320.38 90,731,241.35 130,280,972.60 43.59
Total 1,343,371,197.18  1,260,853,122.99 1,573,011,265.69 24.76            Agriculture Sector
3.4 The Agricultural Sector is split into 3 administrative sub-sectors namely, General Agriculture, Horticulture and Tobacco. Exports approved under the three Agriculture Sub-sectors are indicated in the Tables below. JANUARY 2008 • MONETARY POLICY STATEMENT 40
General Agriculture Export Shipments Value of Forms CD1Approved (USD) 2007 Value of Forms CD1 Approved (USD) 2006  Variance  2007 on 2006
%Change
January 18,366,956.08 11,349,999.14 7,016,956.94 61.82
February 17,538,111.94 8,673,364.32 8,864,747.62 102.21
March 13,559,517.94 12,517,099.41 1,042,418.53 8.33
April 8,463,705.99 8,707,152.26 (243,446.27) (2.80)
May 13,862,241.89 16,148,282.28 (2,286,040.39) (14.16)
June 19,359,330.82 23,781,375.27 (4,422,044.45) (18.59)
July 28,264,995.14 29,105,767.09 (840,771.95) (2.89)
August 28,459,491.25 23,059,306.97 5,400,184.28 23.42
September 18,961,125.74 25,790,127.00 (6,829,001.26) (26.48)
October 21,316,306.38 19,417,798.02 1,898,508.36 9.78
November 25,448,216.92 24,343,425.44 1,104,791.48 4.54
December 10,451,998.58 13,090,571.78 (2,638,573.20) (20.16)
Total 224,051,998.67 215,984,268.98 8,067,729.69 3.74                                3.5 For the period 1 January to 31 December, 2007, export shipments under the general Agriculture sub-sector amounted to US$224,051,998.67 compared to US$215,984,268.98 worth of exports for the same period in 2006. This represents an increase in exports of 3.74%.
3.6 This reflects the positive impact of the concessionary supprt the Sector has been receiving from the Reserve Bank over the past four years.
JANUARY 2008 • MONETARY POLICY STATEMENT 41
Horticulture Export Shipments      Value of Forms CD1Approved (USD) 2007 Value of Forms CD1 Approved (USD) 2006 Variance %Change
2007 on 2006
January 2,706,890.12 2,707,885.73 (995.61) (0.04)
February 2,910,612.92 2,944,812.85 (34,199.93) (1.16)
March 2,786,637.73 2,387,815.29 398,822.44 16.70
April 2,956,863.56 2,058,783.83 898,079.73 43.62
May 3,116,089.47 3,902,943.75 (786,854.28) (20.16)
June 2,457,508.53 3,324,285.09 (866,776.56) (26.07)
July 2,438,015.98 1,816,965.37 621,050.61 34.18
August 2,026,544.18 2,225,388.41 (198,844.23) (8.94)
September 2,306,185.54 3,049,428.63 (743,243.09) (24.37)
October 2,402,631.73 3,381,580.90 (978,949.17) (28.95)
November 2,380,817.90 2,492,702.91 (111,885.01) (4.49)
December 1,736,940.00 1,909,886.45 (172,946.45) (9.06)
Total 30,225,737.66 32,202,479.21 -1,976,741.55 (6.14)                               3.7 As of 31 December 2007, US$30,225,737.66 million worth of horticulture exports (shipments) had been registered. This represents a 6.14% decrease over 2006 exports in a similar period.Â
JANUARY 2008 • MONETARY POLICY STATEMENT 42
Tobacco Sub-sector
3.8 For the period January to 31 December, 2007, tobacco exports amounted to US$280,828,384.16 compared to US$279,798,479.61 worth of exports in the same period in 2006.                              Value of Forms CD1Approved (USD) 2007 Value of Forms CD1 Approved (USD) 2006  Variance  %Change
2007 on 2006
January 77,111,640.23 28,021,364.55 49,090,275.68 175.19
February 17,993,464.68 33,113,775.12 (15,120,310.44) (45.66)
March 13,128,871.84 34,479,366.34 (21,350,494.50) (61.92)
April 7,389,776.17 7,118,524.24 271,251.93 3.81
May 9,927,706.05 13,751,452.73 (3,823,746.68) (27.81)
June 6,246,725.76 6,918,524.72 (671,798.96) (9.71)
July 6,404,146.66 8,975,806.84 (2,571,660.18) (28.65)
August 14,715,561.50 23,586,255.30 (8,870,693.80) (37.61)
September 18,424,563.82 15,505,006.43 2,919,557.39 18.83
October 30,595,813.18 31,042,196.44 (446,383.26) (1.44)
November 45,220,774.94 48,949,588.77 (3,728,813.83) (7.62)
December 33,669,339.33 28,336,618.13 5,332,721.20 18.82
Total 280,828,384.16 279,798,479.61 1,029,904.55 0.37                               3.9 Owing to the support the tobacco sector has received from the Reserve Bank, production in 2007/2008 season is expected to surpass the 63 million kgs realized in 2007.
3.10 Increase in production levels results in increased exports, as merchants have enough tobacco to blend.   JANUARY 2008 • MONETARY POLICY STATEMENT 43
Manufacturing Sector
3.11 Exports recorded under the Manufacturing Sector are as indicated in the Table below:
Manufacturing Export Shipments                                Value of Forms CD1Approved (USD) 2007 Value of Forms CD1 Approved (USD) 2006  % Change
2007 on 2006
January 17,950,428.54 17,397,167.35 3.18
February 19,130,433.89 18,573,450.89 3.00
March 22,716,094.93 22,675,966.48 0.18
April 18,003,823.39 35,043,669.13 (48.62)
May 40,136,748.32 22,584,665.59 77.72
June 30,575,016.41 29,196,511.43 4.72
July 21,043,014.11 19,910,343.29 5.69
August 34,372,794.10 35,350,338.02 (2.77)
September 17,703,671.79 22,904,928.43 (22.71)
October 20,517,296.13 22,427,749.15 (8.52)
November 26,361,869.48 26,829,546.36 (1.74)
December 14,311,295.37 17,968,556.03 (20.35)
Total 282,822,486.46 290,862,892.15 (2.76)                  3.12 For the period 1 January to 31 December 2007, export shipments under the Manufacturing Sector amounted to US$282,822,486.46 compared to US$290,862,892.15 worth of exports for the same period in 2006. This represents an overall 2.76% decrease in manufactured exports, largely occasioned by capacity underutilisation, raw material shortages and power cuts.                   JANUARY 2008 • MONETARY POLICY STATEMENT 44
MINING SECTOR
Mineral Shipments
3.13 Cumulative mineral shipments, excluding gold, for the period 1 January to 31 December 2007 were US$849,591,281 compared to US$702,220,178 in 2006, representing a 283% increase in mining export shipments.
Mineral Shipments                       Value of Forms CD1 Approved (USD) 2007 Value of Forms CD1 Approved (USD) 2006 Variance % Change
2007 on 2006
January 63,439,096.80 52,159,363.35 11,279,733.45 21.63
February 57,072,187.21 39,616,821.78 17,455,365.43 44.06
March 81,878,781.41 60,152,097.73 21,726,683.68 36.12
April 71,409,704.82 39,649,266.32 31,760,438.50 80.10
May 86,083,102.85 76,986,314.21 9,096,788.64 11.82
June 81,944,450.44 67,198,947.44 14,745,503.00 21.94
July 97,473,410.80 64,341,175.00 33,132,235.80 51.49
August 45,433,507.97 67,370,109.37 (21,936,601.40) (32.56)
September 46,388,677.53 52,894,385.87 (6,505,708.34) (12.30)
October 70,356,447.30 60,983,172.35 9,373,274.95 15.37
November 77,604,369.66 64,114,226.43 13,490,143.23 21.04
December 70,507,543.75 56,754,298.11 13,753,245.64 24.23
TOTAL 849,591,280.54 702,220,177.96 147,371,102.58 282.95                      3.14 The year 2007 recorded positive monthly growth in shipments (except for July and August) compared to the previous year owing to the upward momentum in metal prices on global markets. JANUARY 2008 • MONETARY POLICY STATEMENT 45
3.15 However, Nickel had the biggest knock after its price rose astronomically to US$55,000/ton in May 2007 and then falling to an average of US$30,000/ton in July and August 2007. Nickel prices ended the year with an average price of about US$25,000/ton.
TRANSPORT SECTOR
3.16 The Table below shows monthly Forms CD3 declarations for 2006 and 2007.
Forms CD3 Declarations (Road-freight)                         Month US$ Value 2007 US$ Value 2006 Year 2007 – 2006 % Change
January 4,366,634.45 4,500,769.57 (2.98)
February 7,379,473.74 6,259,694.95 17.89
March 5,729,235.83 7,444,924.61 (23.05)
April 5,518,617.90 3,349,046.40 64.78
May 4,073,691.42 5,768,476.55 (29.38)
June 5,546,710.63 7,917,000.84 (29.94)
July 6,894,297.83 4,250,860.16 62.19
August 3,098,307.98 3,425,274.81 (9.55)
September 7,218,531.22 9,050,056.70 (20.24)
October 7,178,100.12 10,826,683.69 (33.70)
November 6,436,765.49 8,593,033.08 (25.09)
December 4,206,390.65 5,514,072.67 (23.72)
Grand Total 67,646,757.26 76,899,894.03 (12.03)       3.17 Total declared Forms CD3 for the whole of 2007 amounted to US$67,646,757.26 as compared to US$76,899,894.03 during the same period in 2006 representing a 12.03% decline.                         JANUARY 2008 • MONETARY POLICY STATEMENT 46
3.18 The shortage of fuel since 2004 has impacted heavily on the operations of cross border transporters. As a result, a decline in earnings is being temporarily experienced during the third quarter of in subsequent years.
Tourism Sector
3.19 Total receipts for the Tourism sector as declared on Forms TR1 & TR2 for the year 2007 amounted to USD49, 332,036.56 representing a decline of 17% compared to USD59,209,858.44 for the same period in 2006. However, the figure represents a 45% Form TR 1 compliance level of designated tourism facilities.
Non Consumptive Tourism Receipts (Forms TR1)
3.20 The Table below shows tourism receipts accounted through declarations on Forms TR1 from the non consumptive sector.
3.21 Receipts in the sector have remained generally stable in the US$30-32 million per annum range.
JANUARY 2008 • MONETARY POLICY STATEMENT 47
Tourism Receipts                     Month  2005 Value of Exports US$  2006 Value of Exports US$  2007 Value of Exports US$
January  3,826,491.04 2,488,811.46 3,834,476.22
February  2,777,905.15 1,913,248.58 3,727,552.60
March  2,858,296.69 2,986,711.50 3,628,027.18
April  3,077,445.73 2,907,156.35 2,477,821.38
May 3,178,963.28 3,437,256.64 3,029,293.46
June 2,832,254.08 3,109,444.64 2,435,305.17
July 2,504,340.93 3,603,731.88 3,604,452.11
August 3,077,196.34 3,224.766.47 2,964,812.24
September 2,299,074.21 4,387,932.88 2,308,895.52
October 2,506,694.37 3,464,556.17 2,330,073.13
November 3,032,996.58 4,691,178.36 1,531.930.79
December 2,901.265.25 Pending  Pending
Total  31,971,658.40 32,990,028,46 30,340,709.01 Consumptive Tourism Receipts (Form TR2)
3.22 Total receipts for the sub sector for the year 2007 amounted to USD 17,370,881.81 as shown below.Â
JANUARY 2008 • MONETARY POLICY STATEMENT 48
Hunting Receipts                 Month 2005 Value of Exports US$ 2006 Value of Exports US$ 2007 Value of Exports US$
January 7,692.00 24,358.00  13,461.00
February 104,775.00 121,601.50  148,993.00
March 653,846.50 745,800.50  678,425.20
April 1,185,113.70 1,606,162.95  1,651,711.90
May 2,338,359.55 2,444,687.46 2,598,117.96
June 2,980,535.09 2,675,102.49  3,026,382.20
July 3,259,685.20 3,276,040.17  3,340,858.25
August 3,471,434.60 3,225,487.01  2,483,198.60
September 2,614,943.35 2,592,298.80 1,879,096.50
October 1,895,762.31 1,461,894.87 1,264,996.70
November 441,862.50 661,783.20 280,110.50
December 172,407.00 101,495.00 5,530.00
Total 19,126,416.80  18,936,711.95 17,370,881.81     3.23 Generally there has been a decline in the hunting receipts in 2007 as compared to the same period in 2006.
3.24 The poor performance of the hunting industry is due:
(a) To the high incidences of under declaration by Safari operators
(b) General decline of trophy quality due to increased cases of rampant poaching
(c) Continued effects of negative publicity and travel bans which have resulted in numerous cancellation of hunting bookings                 JANUARY 2008 • MONETARY POLICY STATEMENT 49
GLOBAL FOREIGN EXCHANGE PAYMENTS
3.25 From January to 31 December, 2007, total global foreign exchange payments amounted to US$1.5 billion.
Approved and Actual Payments (January to December 2007)                  Month Approved Payments Total Actual Payments Pipeline/ Funding Shortfall Shortfall (%)
January 147,506,367.00 111,585,230.00 35,921,137.00 24%
February 160,656,023.00 125,793,825.00 34,862,198.00 22%
March 152,612,344.00 114,773,747.00 37,838,597.00 25%
April 128,268,728.00 98,825,423.00 29,443,305.00 23%
May 148,798,715.14 127,140,339.51 21,658,375.63 15%
June 161,010,349.55 138,206,587.99 22,803,761.56 14%
July 177,278,966.61 139,163,796.62 38,115,169.99 22%
August 162,460,568.00 120,893,561.61 41,567,006.39 26%
September 163,368,197.00 160,386,013.36 2,982,183.64 2%
October 202,137,804.00 146,873,875.10 55,263,928.90 27%
November 236,341,877.00 145,543,442.81 90,798,434.19 38%
December 154,568,770.00 105,842,213.97 48,726,556.03 32%
Total 1,995,008,709.30 1,535,028,055.97 459,980,653.33 23%                   Sources of Funding for Actual Payments (Jan-Dec 2007)
3.26 Of the US$1.5 billion recorded in 2007 for various imports, 70% was paid from exporters’ foreign currency retention with the balance being financed from offshore loans (24%) and interbank market (6%). JANUARY 2008 • MONETARY POLICY STATEMENT 50
Sources of Funding for Actual Payments (Jan-Dec 2007)
GLOBAL FOREIGN CURRENCY RECEIPTS
3.27 From 03 January 2007 to 31 December 2007, Global Foreign Currency receipts amounted to USD2 212 771 814. For the same period last year Global foreign currency receipts amounted to USD2 072 121 753 representing a 6.79% increase.
3.28 The global foreign currency receipts for period January to December 2006 and 2007 are shown in the Table below.                           JANUARY 2008 • MONETARY POLICY STATEMENT 51
Global Foreign Currency Receipts for January -December 2006 and 2007TYPE OF RECEIPTÂ YEAR 2006Â % CONTRÂ YEAR 2007Â % CONTRÂ % CHANGE
Export Proceeds 1 237 613 923 59.73 1 350 758 741 61.04 9
Loan Proceeds 157 639 654 7.61 185 600 648 8.39 18
Free funds 394 836 729 19.05 449 364 578 20.31 14
Homelink  5 718 992 0.28 47 511 561 2.15 731
Income receipts 73 206 295 3.53 26 025 161 1.18 (64)
Capital investments 1 758 246 0.08 29 459 0 (98)
Gold Receipts  201 337 816 9.72 153 481 668 6.94 (24)
TOTAL PER YEARÂ 2 072 111 655Â 100Â 2 212 771 815Â 100Â 7 Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Comparison of Global Foreign Currency Receipts for Years 2006 and 2007
JANUARY 2008 • MONETARY POLICY STATEMENT 52
Use of International Credit Cards by Foreign Visitors
3.29 Monetary Authorities fully appreciate the need for fast, reliable and efficient methods of settling foreign currency transactions by foreign visitors.
3.30 It has, however, been noted with disappointment that some banks pulled off from the market, their Processing Data Quickly Machines (PDQMs) for processing international credit cards.
3.31 This development has a negative effect on tourism considering that the whole region is preparing for the influx of foreign visitors for World Football Show case in 2010.
3.32 The Central Bank has noted that some tourists are crossing into our neighbouring countries in order to utilise their credit cards, as well as, services in those countries, depriving our country of the much-needed foreign exchange.
3.33 To this end, Authorised Dealers are encouraged to install or reinstall PDQMs, to facilitate payment by use of international credit cards by foreign visitors.
3.34 The Reserve Bank will facilitate timeous reimbursement of the Zimbabwe Dollars to banks so that they do not incur unnecessary costs.
3.35 In addition to those Authorised Dealers who wish to procure the necessary resources to reinstall PDQMs, the Reserve Bank will       JANUARY 2008 • MONETARY POLICY STATEMENT 53
consider their applications for the requisite foreign exchange resources for this purpose.
4. REAL SECTOR DEVELOPMENTS
GDP GROWTH
4.1 The economy is estimated to have declined by about 6% in 2007. This contraction in economic activity has been mirrored in output decline in all sectors of the economy with the exception of a marginal increase in agricultural output.
4.2 Production has been constrained by a critical shortage of foreign exchange for the procurement of essential raw materials, equipment and machinery. Frequent power outages, coupled with high production costs are adversely affecting economic activity.
4.3 Price controls which were instituted in June 2007 adversely affected the viability of manufacturing and distribution sectors of the economy.
AGRICULTURE
4.4 Notwithstanding drought conditions experienced during the 2006/2007 cropping season, a real growth of 1.4% is estimated for the agricultural sector in 2007. The sector is expected to grow by 12.4% in 2008 on the back of good rains and enhanced mechanisation of the sector.
JANUARY 2008 • MONETARY POLICY STATEMENT 54
4.5 Tobacco and soya beans were among the major crops contributing to 2007’s overall positive agricultural performance.
4.6 Tobacco farmers were able to increase output from 55 000 tons in 2006 to 73 000 tons in 2007, due to better preparations and grower support for the crop by Government which resulted in improved yields. Area planted also increased from 40 000 hectares in 2006 to 48 000 hectares in 2007.
4.7 With regard to growth in the other crops, groundnuts output rose from 83 000 tonnes to 125 000 tonnes, soya beans from 70 000 tonnes to 102 000 tonnes and sunflower from 20 800 tonnes to 25 700 tonnes.
4.8 The above positive performances offset the drought induced decline in maize production. Maize output fell from 1 485 000 tons in 2006 to 953 000 tons in 2007.
4.9 Winter wheat production, however, suffered extensively from power supply interruptions. These compromised irrigation operations, thus reducing overall wheat yields. This, notwithstanding, a commendable crop of 144 000 tonnes was estimated for 2007, compared to 163 000 tonnes for 2006.
4.10 Improved access to a wide range of farm machinery and equipment, and inputs such as fertilisers, seeds and chemicals during the 2007/2008 farming season, is expected to bolster agriculture activity.
JANUARY 2008 • MONETARY POLICY STATEMENT 55
4.11 Farmers are accessing inputs through the country-wide GMB depots. In the case of seed maize, measures are in place to provide for the estimated shortfall of 15 000 tons through imports. Seed houses have availed 35 000 tons of seed maize.
4.12 The incessant rains from the onset of the 2007/2008 agriculture season have, however, adversely affected planting and the already planted crops.
MINING
4.13 Notwithstanding the general surge in global mineral prices, the mining sector remains depressed.
4.14 The mining sector faces major challenges which include reduced production, against the background of leakages and escalating mining costs. Furthermore, inadequate foreign exchange and electricity supply interruptions have exacerbated the decline in production levels.
415 Platinum production was maintained at previous year levels, which stood at 5 300 kgs.
4.16 Nickel production also benefited from the opening up of new mines and is estimated to have increased from 8 800 tons in 2006 to 9 000 tons in 2007.Â
JANUARY 2008 • MONETARY POLICY STATEMENT 56
4.17 The major challenges facing the mining sector are as follows:-
i. Frequent electricity outages;
ii. Fuel shortages;
iii. Foreign currency shortages to import critical inputs;
iv. Delays in issuing licenses;
v. Brain drain; and
vi. Uncertainty surrounding the provisions of the Mining and Minerals Amendment B