Broad money supply jumps 30,64%

BY TATIRA ZWINOIRA

ZIMBABWE’S annual broad money supply increased by 30% to $9,85 billion in January, down from $7,54 billion last year, despite efforts by government to keep a lid on money supply in order to lower inflationary pressures in the market.

The Reserve Bank of Zimbabwe (RBZ) noted in its January 2019 economic review that annual broad money supply growth increased by 5,56% points to 30,64% in January 2019, from 28,05% in January 2018.

“The annual growth in money supply was, in large part, attributable to expansions in demand deposits, 37,97%; currency in circulation, 43,10% and time deposits, 0,88%. This was partially offset by a decline of 8,84% in negotiable certificates of deposits.”

On a month-on month basis, broad money supply declined by 1.53% from $10 billion in December 2018 to $9, 8 billion.

Demand deposits accounted for 79,71% of broad money, time deposits (14,88%), currency in circulation (4,82%), and negotiable certificates of deposits (0,60%).

International best practice requires currency in circulation to be at least 15% of the value of the cash in bank.

“I think in this case, what is driving the inflation rate more is the exchange rate rather than money supply. However, over time, one would want to say if you arrest the growth in money supply, there won’t be much money to chase even in that exchange rate. If you tighten on your money creation, yes, you should see inflation responding, but in our case, it’s because of the high exchange rate pass through effects to prices,” said a top banker who did not want to be named.

Finance Minister, Mthuli Ncube, has put in place an auction system for Treasury Bills and frozen government’s overdraft facility with the central bank to try and curb growth in monetary supply.

Financial expert Persistence Gwanyanya said based on the reduction of the month-on-month growth, it was still too early to tell whether government’s strategy of controlling money supply was working.

Source :

newsday

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