Money supply up by ZWL$3 million

Published: 04 July 2019

THE Reserve Bank of Zimbabwe (RBZ) says the country has recorded an annual increase of money supply by almost ZWL$3 million while both exports and imports decreased by over 15%.

This is contained in the central bank's March 2019 Monthly Economic Review.

"Annual broad money supply increased from ZWL$7 693.30 million in March 2018, to ZWL$10 627.38 million in March 2019.

"Month-on-month, broad money supply increased by 2.29%, from $10 389.30 million in February 2019 to $10 627.38 million," reads the report.

Money supply recorded an annual growth of 38.14% in March 2019, from 37.94% recorded in February 2019.

The growth was reflected in demand deposits, which grew by 49.52%; currency in circulation, 37.09%; negotiable certificates of deposits, 3.63%; and time deposits, 3.62%.

The issue of money supply is determined by the total quantity of money in circulation at a point in time and economists often follow such trends because growth signifies possibility of an inflationary upward trend.

International best practice requires currency in circulation to be at least 15% of the value of the cash in bank which has not been the case for Zimbabwe.

During the period under review, exports registered a 15.3% decline while imports declined by 19.4%, from US$408 million in February 2019 to US$329 million in March 2019.

This was on the back of decreases in exports of nickel mattes; tobacco; diamonds and cane sugar. Gold; nickel ores and concentrates; ferro-chromium; chromium ores and concentrates; and platinum exports, however, increased, during the period under review.

Merchandise imports also declined by 19.4%, from US$408 million in February 2019 to US$329 million in March 2019.

In terms of proportions, diesel accounted for 21.2%; unleaded petrol 10%; vaccines, 1.6%; and tractors, 1.3% of total imports.

"The reduction in imports reflected the impact of import demand management measures being implemented by government, coupled with foreign currency constraints," the report said.

Assessing the trends, economist Prosper Chitambara said that the obtaining trends were worrying as they threatened the stability of local currency and prices on the markets.

"The growth of money supply needs to be controlled especially now that we have a local currency because failure to do so simply means that inflation will continue to rise and prices on the markets will remain unstable," he said.

He added that the obtaining foreign currency shortages which have seen business struggling to get enough money to buy spares for machinery in the mining sector has negatively impacted on production.
- newzimbabwe