eBusiness Weekly
Tapiwanashe Mangwiro
A weakening local currency against the United States Dollar has driven year on year broad money growth by 388,75 percent as at August 31, 2022.
The Reserve Bank of Zimbabwe in its latest monthly economic review, said the increase in broad money was largely driven by the exchange rate revaluations over the year.
The RBZ said; “The auction rate moved from $86.06 per US$1 in August 2021 to $546.83 per US$1 in August 2022, resulting in the growth of the Zimbabwe dollar equivalent of Foreign Currency Accounts (FCA) deposits, from $133,77 billion in August 2021 to $991,10 billion in August 2022.”
To put the numbers in perspective, FCA deposits have grown by 16,13 percent in the twelve months to August 2022, but the local currency which is used to measure deposits in broad money depreciated by 536,51 percent in the same period.
As at August 2021, FCA deposits stood at US$1,55 billion and have only grown by US$250 million to close August 2022 at US$1,8 billion.
Analysts have blamed the current policy pronouncements for a decline in foreign currency deposits this year as depositors feel robbed by the institutions.
Economist Prof. Tony Hawkins said; “The laws are draconian and depositors are rational people who have voted with their pockets. How can you say transactions of nostro payments are being levied a 4 percent transaction cost on top of the usual bank charges? The economics professor added that, this is a way of telling people to keep your money as far away as you can from the bank.”
Another economist, Tinevimbo Shava said; “This is not a good picture in absolute terms as the country needs these deposits for foreign currency loans. These loans are the closest we have to getting internal working capital to recapitalise our firms.”
Both economists said the country needs to re-evaluate its laws as the intended result has been overtaken by results of the new monetary policy stance regarding gold coins and the interest rates that have forced people to transact more in foreign currency.
In the period under review, the local currency component of broad money also grew by 216,16 percent over the same period. According to the monthly economic review report, annual growth in broad money was largely driven by increases of $656,33 billion representing a 438,01 percent in credit to private sector, $194,23 billion which is a 506,59 percent in net claims on Government and credit to public non-financial enterprises which grew by $110,10 billion or 796,35 percent.
In the 12 months to August 2022, credit to the private sector was mainly channelled to households and agriculture, which received 23,65 percent and 18,84 percent of the total credit, respectively. The distribution and manufacturing sectors received 13,44 percent and 12,55 percent, respectively maintaining the trend of the past two years.
Credit to the private sector was largely channelled towards inventory build-up as they gobbled 35,22 percent of the credit while other recurrent expenditures accounted for 29,53 percent of credit and fixed capital investments also took a share of 16,62 percent.
On a month-on-month basis, broad money increased by 33,26 percent in August 2022, compared to 7,83 percent recorded in the previous month of July 2022.
“The growth largely reflected increases of 43,88 percent in foreign currency deposits and 19,33 percent in local currency deposits, from $688,83 billion and $514,39 billion in July 2022 to $991,10 billion and $613,80 billion, respectively,” the RBZ said.
During the month under review, domestic claims increased by 29,83 percent from $272,04 billion, to $1,2 trillion.
RBZ said; “The growth was largely due to increases of $125.45 billion and $105,66 billion in credit to the private sector and net claims on Government, respectively.”
