News Column

Broad Money Supply Surges By U.S.$318 Million

July 21, 2014



Broad money supply surged by $318 million in the year to May 2014 as the country's deposits base responded to the positive effects of a successful tobacco season, the latest report from the Reserve Bank of Zimbabwe shows.

The money supply measure expanded to 7,66 percent in May 2014, from 6,65 percent in April. In absolute terms, broad money supply rose to $4,32 billion in May from US$4,02 billion in April, reflecting more money circulating in the financial system.

Broad money registered a monthly increase of 2,25 percent between April and May 2014.

"Expansions were registered in all deposit classes with savings deposits recording the highest annual growth of 12,5 percent.

The growth in money supply continued to be driven by tobacco sales. This year, tobacco farmers sold about 205 million kilograms of the golden leaf worth $652 million in a selling season that ended on June 27.

There has also been a pro-active approach from the Bankers Association of Zimbabwe with regards the promotion of a savings culture in the economy.

The sluggish performance of the economy continued to hamper robust growths rates in the broad money. The main sources of liquidity under the multi-currency system are exports, external lines of credit and diaspora remittances, given that the central bank cannot inject liquidity into the economy. These have not managed to generate enough liquidity to achieve desirable levels of money supply growth.

Deposits held by banks largely emanated from utilities and local authorities, 25,78 percent, households, 14,6 percent, financial organisations, 20,08 percent and distribution 8,9 percent.

During the period under review, credit to the private sector declined marginally to $3,591 billion from $3,595 billion in April. On a month-on-month basis, credit to the private sector also fell by 0,1 percent in May 2014, from US$3,594 billion in April.

"The slowdown reflects constrained lending by banks on the back of attendant liquidity challenges, as well as risk aversion occasioned by increasing non-performing loans."

The value of transactions processed through the RTGS system in May 2014 decreased by 7 percent to $3,2 billion, from $3,4 billion in April 2014 while the volume of transactions registered an increase of 9 percent, from 183 626 to 200 146 in the same period.

The total value of card-based transactions increased by 5,2 percent to $399,11 million in May 2014, from $379,42 million in April 2014.

The value of mobile and internet-based transactions also increased by 19 percent, from $360,67 million in April 2014 to $429,27 million in May.

There is rapid expansion of mobile banking in Zimbabwe which has culminated in the financial inclusion of the previously unbanked.


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Source: AllAfrica


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