Central Bank Quasi-Fiscal Losses and High Inflation in Zimbabwe: A Note
IMF Working Papers, April 1, 2007
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Bibliographic details
- Authors: Sònia Muñoz
- Published: April 1, 2007
- Series: IMF Working Papers
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 these losses were financed by creating money creation or issuing RBZ securities, they contributed to the four-digit inflation reached in 2006.
- The remedy recommended is to eliminate the causes of losses by implementing measures to improve the cash-flow of the bank and restore its financial position.
Major Findings and Key Statistics
- Quasi-fiscal losses: estimated to have amounted to about 75 percent of GDP in 2006.
- Inflation outcome: contributed to four-digit inflation in 2006.
- Publication size: Pages: 20.
Causes and Mechanisms
- Financing methods:
- Creation of money creation.
- Issuance of RBZ securities.
- Macroeconomic impacts:
- Undermined monetary management.
- Compromised the independence and credibility of the RBZ.
- Subject areas implicated: Banking, Central banks, Financial statements, Foreign exchange, Inflation, Open market operations, Prices, Public financial management (PFM), Quasi-fiscal operations.
Policy Recommendations and Remedies
- Eliminate the causes of quasi-fiscal losses.
- Implement measures to improve the cash-flow of the Reserve Bank of Zimbabwe.
- Restore the RBZ's financial position to reestablish monetary management, independence, and credibility.