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Money Supply Surges

Zimbabwe’s reserve money for the week ending 14th January 2022 grew by ZW$1.06 billion to ZW$27.18 billion from the previous week’s position of ZW$26.12 billion as it continues to widen the gap ahead of December levels of ZW$25.94 billion with two more weeks to go to month-end, the latest Reserve Bank of Zimbabwe (RBZ) figures show.

Reserve money, refers to local banks’ balances sitting with the RBZ which are kept for purposes of lending to various economic participants without negatively impacting on the economy.

In the local context, a decline in reserve money is welcome given the high levels of inflation, as it restricts money supply in the economy while any increase has to be closely monitored within sustainable levels that do not exert pressure on inflation.

The RBZ has been keeping a close eye on money supply in the economy which has previously been a major driver of exchange rate movements and local currency depreciation.

According to the Bank, “The growth in reserve money largely reflected an increase of ZW$1.11 billion and ZW$71.93 million in required reserves and currency issued, respectively,”

“Partially offsetting this increase was a decline of ZW$118.75 million in banks’ liquidity (RTGS balances) at the Central Bank.”

Currency issued by the RBZ during the week under review was ZW$ 5.21 billion from ZW$5.14 billion previous week while banking sector deposits during the period under review reached ZW$ 21.09 billion from ZW$ 20.98 billion realized previous week.

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Authorities are still grappling with taming inflation to stable, sustainable levels with December month-on-month inflation having closed at 5.76 percent.

Government expects average annual inflation to fall from 94.6 percent in 2021 to 32.6 percent this year and to 17.5 percent in 2023, on tight fiscal interventions.

However, to achieve these targets, analysts have warned authorities against falling into the temptation of creating more money as the case in previous years prior to elections ahead of the 2023 general plebiscite.

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