Zimbabwe’s reserve currency balance declined by 8.17% to $25.94 billion in the week ending December 31, 2021, according to data from the Reserve Bank of Zimbabwe (RBZ).
The decrease in the monetary reserve is from a previous week ending December 24, 2021 position of $28.25 billion.
Reserve currency refers to currency in circulation and deposits with commercial banks as well as bank deposits with them. Slowing reserve currency growth means the country is at the center of lower inflationary pressures.
During the period, currency issued by the central bank increased slightly by $1.07 million to $5.15 billion.
“This decline was partially offset by an increase of $1.07 million in foreign currency issued,” the Reserve Bank of Zimbabwe said in the latest reserve currency update.
The decline in reserve currency was due to a $1.99 billion drop in bank liquidity at the central bank, coupled with a $319.60 million decrease in reserve requirements
Monetary reserve refers to holdings of foreign currency, precious metals and other highly liquid assets used to redeem national currencies and bank deposits and to meet current and short-term financial obligations of the central bank, government treasury or government. another monetary authority of a country.
During the 2021 monetary policy, the apex bank said it would maintain its conservative monetary targeting framework.
The RBZ said this would be achieved by reducing quarterly reserve currency growth from the quarterly target of 25% in 2020 to 22.5% per quarter in 2021.
The authorities maintain that the current stability of inflation and exchange rate developments must be safeguarded, maintained and sustained to support the growth trajectory of the economy.
The reserve currency target of 22.5% was in line with the year-end inflation target of below single digits and the projected economic growth rate of 7.4% for 2021.
However, in mid-2021, the reserve currency target was reduced to 20%.
Recently, the central bank revised its monetary reserve targets from 20% to 10% for the fourth quarter of 2021 and the first two quarters of 2022.
According to the Monetary Policy Committee, the decision to revise reserve currency growth targets was informed by the reserve currency growth performance of 9.3% achieved in the third quarter ended September 30, 2021.
Currently, reserve currency growth is at 27.07%, so it is doubtful that the 10% target for the fourth quarter will be met given that the quarter is coming to an end.