- Total bank deposits stood at ZW$34.5 billion as at 31 December 2019, composed of ZW$22.0 billion (64%) in local currency and ZW$12.5 billion (US$785 million) or 36% in foreign currency
- RBZ says it is strongly monitoring money supply to ensure that it does not cause inflation and/or bring volatility to the exchange rate
- The Bank said it is committed to the full implementation of the monetary targeting framework to regulate the amount of money supply in the economy
Harare – As Zimbabwe is reeling from one of its worst economic downturns, about 50% of the country’s total bank deposits is concentrated on only 200 entities whilst the majority of the Zimbabwean population is struggling to make ends meet in an economy with a huge output gap.
This was revealed in the latest Monetary Policy Statement presented by the Reserve Bank of Zimbabwe (RBZ) Governor, Dr John Mangudya on Monday.
According to the report, the level of liquidity or money supply in the economy as measured by total banks’ deposits stood at ZW$34.5 billion as at 31 December 2019, composed of ZW$22.0 billion (64%) in local currency and ZW$12.5 billion (US$785 million) or 36% in foreign currency.
“It is this liquidity or stock of money that is the key focus area that the Bank is mandated to manage to ensure that it does not cause inflation and/or bring volatility to the exchange rate,” Dr Mangudya said in the report.
These statistics on one hand shows that majority of the citizens have been reduced to consuming all their earnings as the rapid currency devaluation and erosion of purchasing power bites such that making savings has become an uphill task for the average citizen.
Others convert a portion of their local currency earnings to foreign currency, which is largely sourced on the black market as a safer store of value. The government outlawed the use of foreign currencies following the implementation SI 142 in June 2019, but appetite for the greenback has remained high while government itself has given USD exemptions to some sectors of the economy.
The Zimbabwean dollar has remained vulnerable to speculative attacks since its abrupt reintroduction in 2019. Brushing off some of the logical concerns about the currency such as lack of economic fundamentals to back it up, the monetary authorities have instead chose to play the blame game.
Last year the Central Bank announced that it was freezing the accounts of some big corporates among them Sakunda Holdings over allegations of exchange rate manipulation.
Considering the issue of key fundamentals, the Zimbabwe dollar has been poised to fall following its reintroduction; it failed to satisfy the confidence test and its attachment to the bond notes and electronic cash which were re-branded RTGS dollars and allowed to float to try and crush the black market has made things worse.
In a further show of no confidence, most businesses are pegging prices in US dollar values whilst others have completely shun the local currency.
To solve the liquidity crisis, the Bank said it is committed to the full implementation of the monetary targeting framework to regulate the amount of money supply in the economy and align it with the desired inflation and exchange rate levels.
“This framework will be operationalised through the use of existing open market operations tools that include Treasury Bills, Savings Bonds, Corporate Bonds, Statutory Reserve Requirements and specific liquidity management instruments to deal with the uneven distribution of deposits in the economy,” Dr Mangudya said.
Also according to the report, as at 31 December 2019, the outstanding Savings Bonds were ZW$1.9 billion, down from ZW$2.2 billion recorded over the same period in 2018.
The statutory reserve balances amounted to ZW$918 million as at 31 December 2019, representing 129% increase from the ZW$401.5 million 2018 position.
Meanwhile, total foreign currency for the period January to December 2019 amounted to US$6.88 billion, compared to US$7.21 billion received during the same period in 2018, representing a 4.4% decrease in foreign currency supply.
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