Zimbabwe’s reserve currency for the week ending January 14, 2022 increased by ZW$1.06 billion to ZW$27.18 billion from the previous week’s position of $26.12 billion ZW, as it continues to widen the gap from December levels of ZW$25.94 billion with two more weeks. end of the month, the latest figures from the Reserve Bank of Zimbabwe (RBZ) show.
Reserve currency refers to local bank balances with the RBZ that are kept for the purpose of lending to various economic actors without negatively impacting the economy.
In the local context, a decline in reserve currency is welcome given the high levels of inflation, as it limits the money supply in the economy, while any increase should be closely monitored at sustainable levels that do not exert no pressure on inflation.
The RBZ closely monitors the money supply in the economy, which was previously a major driver of exchange rate movements and local currency depreciation.
According to the Bank, “the growth in reserve currency largely reflects an increase of Z$1.11 billion and Z$71.93 million respectively in required reserves and issued currency.”
“This increase was partially offset by a decline of Z$118.75 million in bank liquidity (RTGS balances) at the Central Bank.”
Currency issued by the RBZ during the review week was ZW$5.21 billion compared to ZW$5.14 billion in the previous week, while banking sector deposits during the review period reached ZW$21.09 billion vs. ZW$20.98 billion achieved the previous week.
The authorities continue to strive to bring inflation under control at stable and sustainable levels, with monthly inflation in December closing at 5.76%.
The government expects average annual inflation to decline from 94.6% in 2021 to 32.6% this year and 17.5% in 2023, thanks to strict budgetary interventions.
However, to achieve these goals, analysts have warned authorities against the temptation to create more money as was the case in previous years ahead of the elections ahead of the 2023 general plebiscite.