Omega Ukama 
THE Reserve Bank of Zimbabwe (RBZ) says it has sterilised an additional $1,99 billion of excess liquidity through open market operations (OMO).
Last month, the apex bank’s governor, John Mangudya said $14,1 billion had been mopped-up through OMO between October and December 2020, which aided containment of money supply below set targets.
In a recent update, the bank said reserve money decreased by $1,8 billion during the week ending March 5, adding that “the decrease in reserve money was attributable to net issuances of OMO savings bonds amounting to $1,99 billion, which had the effect of withdrawing liquidity from the market”.
In line with its conservative monetary targeting framework, Mangudya says the bank has escalated OMO by aggressively mopping up excess liquidity through the issuance of short-term savings bonds.
In his 2021 Monetary Policy Statement last month, Mangudya said the OMO savings bonds, which offer an interest of five percent per annum, have complemented existing savings bonds that had a total outstanding amount of $5,6 billion as at December 2020, bringing the total stock of central bank bonds in issue at the end of the year to $19,7 billion.
Reserve money — the fundamental component of money supply — closed 2020 at $18,76 billion, compared to a target of $25,20 billion, according to the apex bank.
And according to the most recent update from the bank, it declined to $18,72 billion on March 12, 2021, from $20,55 billion recorded the previous week.
The governor says the bank achieved a “conservative” quarterly growth in reserve money of 18,6 percent in 2020, against a target of 25 percent per quarter.
“Containment of reserve money… is attributable to the bank’s active mopping-up programme through OMO and the strong fiscal consolidation measures that have seen the government completely refraining from resorting to the overdraft window at the central bank.”
The central bank insists that out-of-control money supply growth is responsible for the high inflation seen in the country over the past two years.
The country’s inflation peaked at 837,58 percent in July 2020 and closed the year at 348,59 percent after a slow-down in the month-on-month figure.
To support previous policies and address emerging risks, the central bank has this year reduced its quarterly target for reserve money growth to 22,5 percent from 25 percent, which it says is consistent with annual inflation of below 10 percent and economic growth of 7,4 percent being pursued by the government.
Analysts, however, say the “fragile” stability seen in the economy in recent months is at risk as unplanned government expenditure remains a “not so distant possibility”.
Zimbabwe is expecting record maize production of between 2,5 and 2,8 million metric tonnes and 360 000 metric tonnes of traditional grains, and analysts who include
Brains Muchemwa say the bumper harvest might put pressure on authorities pressed to keep spending in check.
This also comes as it has emerged that as much as $60 billion will be needed for maize purchases alone.
Mangudya, however, insists that this will not trigger money supply growth.
“The $60 billion is going to be required over a period of time from April or May… up to the end of September.
“Therefore, the $60 billion is not required in one day. It is a flow, now what analysts were doing was looking at a snap-shot analysis, but we are talking of a flow,” the governor told a Confederation of Zimbabwe Industries virtual symposium earlier this month.
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