National Payment System: Here is what the data is actually revealing.

  • The value of transactions processed through NPS surged 9 percent in Q1
  • While the volume of these transactions plunged 29 percent
  • The sharp decline in transaction volume indicates an economic slowdown in Q1

The Reserve Bank of Zimbabwe (RBZ) has recently published the 2021 first quarter statistics for the National Payment System (NPS). The statistics showed a wide divergence between the value of and the volume of the NPS transactions.

A glance at the data has shown that a total of 338.54 thousand transactions worth ZW$1.24 trillion were processed through the NPS in Q1:21 relative to a transaction volume of 473.91 thousand valued at ZW$1.13 trillion processed in the previous quarter, Q4:20. Transaction volume severely declined and the payment streams leading to volume decline were Point of Sale (POS), Mobile, and Cash which plunged by 30 percent, 29 percent, and 16 percent respectively.

For a country that does not provide estimates of quarterly economic growth to constantly gauge the health of the economy, one can get a general idea using these NPS numbers. On a quarter-on-quarter basis, the value of transactions is now increasing at a decreasing rate in line with inflation developments. The value has increased by 9 percent in Q1:21 from the 53 percent jump recorded in Q4:20 and by another 111 percent a quarter earlier (Q3:20). It is the moderate growth in monthly prices experienced since the turn of 2HY20 that is slowing the growth in value of NPS transactions.

It will be misleading to view the growth in the value of NPS transactions in Q1:21 entirety to the growth in real Gross Domestic Product (GDP). This is so because NPS transaction value highly depends on the pace and direction of prices. According to, real GDP is an inflation-adjusted measure that reflects the value of all goods and services produced by an economy in a given year (expressed in base-year prices) and is often referred to as constant-price or inflation-corrected GDP.

The RBZ data shows the volume of NPS transactions in the first quarter plummeting significantly. In 2020 when the economy was under the scourge of runway exchange rate, rising inflation, and COVID-19 pandemic, the volume of transactions nosedived for 3 consecutive quarters ending September 2020. Total transaction volume, however, recovered 11 percent in Q4:20 thanks to partial economic re-opening from lockdown instituted early 2020. This led to a relatively improved macroeconomic environment resulting in a mild industrial production recovery and an uptick in aggregate demand.

In the first quarter of 2021, the value of NPS transactions has ballooned 9 percent while the volume has plunged by 29 percent. This transaction volume decline indicates a significant slowdown in economic activity thanks to nationwide COVID-19 induced lockdown which was implemented for most of that quarter. Usually, a surge in both transaction value and volume indicates an uptick in economic activity. The surge in the former alone indicates rising prices but declining or constant national output.

The economy continues facing enormous challenges despite projections for economic recovery by both government and independent analysts. As activity in the 2021 Agric marketing season is progressing and civil servants waiting for a 45 percent salary hike this June, ZW$ depreciation pressure particularly in the alternative markets remains elevated -a culmination of increased market liquidity.

Currently, the local currency is trading upwards of ZW$130 to the US dollar in the alternative markets versus ZW$85 in the official market (RBZ FX Auction). Consequently, parallel market premiums are now hovering above 50 percent against best global standards for the stability of around 20 percent. This development means that it is now incorrect to view the local currency as stable basing on the ZW$ performance on the interbank market.

The continued plummeting of ZW$ on the parallel markets threatens the stability of general prices. Many estimates have the Zimbabwean economy as 60 percent informalized and the informal sector operators benchmark their prices using parallel rates. Also, since the promulgation of SI 127 of 2021, we have witnessed an inflation wave mostly in US dollar terms. Generally, it is impossible to unify exchange rates by use of force but rather through the implementation of prudent economic policies. More so, downside risks to the economic recovery continue to linger due to the resurgence of COVID-19 infections versus low vaccination rates in most parts of the world.

While economic recovery seems likely this year thanks mostly to a better Agric season, improved electricity generation and rising global commodity prices among other factors, burgeoning liquidity levels in the domestic economy are brewing hazardous conditions for exchange rate and price stability.


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