Omega Ukama 
THE Reserve Bank of Zimbabwe (RBZ) issued savings bonds worth $4,99 billion in April to mop-up excess liquidity.
The bank has been escalating open market operations (OMO) by aggressively mopping-up excess liquidity through the issuance of short-term savings bonds to support its conservative monetary targeting framework.
In an update, the apex bank said reserve money increased by $1,83 billion to $21,90 billion during the week to April 16, 2021, which it attributed to the payment of monthly wages and salaries of civil servants by the government.
“Partially offsetting the increase in liquidity were mopping up operations by the bank, which resulted in an increase of $2,32 billion in savings bond issuances during the week,” the bank said.
This was in addition to an increase, in the bonds, of $2,67 billion announced by the bank in an update for the week ending April 9, 2021.
At least $1,99 billion worth of bonds were issued by the bank in March, and $14,1 billion was sterilised through similar OMO between October and December 2020, according to governor John Mangudya.
In his 2021 Monetary Policy Statement in February, Mangudya said the total stock of central bank bonds in issue at the end of 2020 was $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.
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”. newsdesk@fingaz.co.zw
