Central Bank Quasi-Fiscal Losses and High Inflation in Zimbabwe: A Note

April 1, 2007

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

Zimbabwe's failure to address continuing central bank quasi-fiscal losses has interfered with both monetary management and the independence and credibility of the Reserve Bank of Zimbabwe (RBZ). Realized quasi-fiscal losses are estimated to have amounted to about 75 percent of GDP in 2006. Because they were financed by creating money creation or issuing RBZ securities, they contributed to the four-digit inflation reached in 2006. The remedy for the current situation is clearly to eliminate the causes of losses by implementing measures to improve the cash-flow of the bank and restore its financial position.

Subject: Banking, Central banks, Financial statements, Foreign exchange, Inflation, Open market operations, Prices, Public financial management (PFM), Quasi-fiscal operations

Keywords: central bank, central bank loss, Central Banking, exchange loss, Financial statements, High Inflation, Inflation, loss, Open market operations, Quasi-fiscal Deficit, Quasi-fiscal operations, RBZ balance sheet, RBZ capital, RBZ law, RBZ pricing, RBZ securities, WP

Pages:
20
Volume:
2007
DOI:
---
Issue:
098
Series:
Working Paper No. 2007/098
Stock No:
WPIEA2007098
ISBN:
9781451866629
ISSN:
1018-5941

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