Almot Maqolo, Staff Writer 
ZIMBABWE’S broad money increased by 9,12 percent to $3,19 trillion in March 2023, compared to $2,92 trillion recorded in February 2023, the Reserve Bank of Zimbabwe (RBZ) has said.
According to the RBZ’s monthly economic review for March, the increase reflects an expansion of $114,56 billion and $152,19 billion in foreign currency deposits and local currency components respectively.
“The money stock was composed of foreign currency deposits, 58,49 percent; local currency deposits, 41,31 percent; and currency in circulation, 0,20 percent,” RBZ said.
Reserve Bank of Zimbabwe governor, John Mangudya
On an annual basis, broad money registered an increase of 442,41 percent, compared to 478,56 percent in February 2023. Broad money saw a growth in its local currency component of 322,47 percent and a rise in its foreign currency component of 579,25 percent.
“The growth in foreign currency deposits from $275,17 billion in March 2022 to $1,86 trillion in March 2023, was largely attributable to valuation changes related to official exchange rate depreciation. Over the year to March 2023, the official exchange rate depreciated from $142,42 per US$1 to ZW$929,86 per US$1.
“The annual increase in broad money was reflected in annual changes in net claims on government and credit to the private sector of $547,90 billion and $1,42 trillion, respectively,” the central bank said.
Domestic claims climbed by 18,10 percent during the reviewed month compared to the 10,92 percent in the preceding month.
“The growth in domestic claims was largely due to increases of $223,37 billion and $165,76 billion in credit to the private sector and net claims on government, respectively,” RBZ stated.
Agriculture and households received the majority of the private sector’s credit, accounting for 24,36 percent and 21,57 percent of the total, respectively. RBZ revealed that 13,75 percent and 10,92 percent of the loan went to the manufacturing and distribution sectors, respectively.
Experts say rising money supply and high demand for the US dollar (US$), as well as a confidence deficit in Zimbabwe, have piled pressure on the domestic unit, resulting in the current spikes in both the official and black market exchange rates.
Economist Eddie Cross said money supply was the major factor in recent exchange rate volatility.
“The apex bank is printing money to buy foreign exchange and gold,” he told The Financial Gazette recently.
“Any increase in local currency — electronic or paper currency will result in the devaluation of the local currency. Speculators benefit, and they also contribute to the problem,” he added.
Equities data analyst Vanessa Machingauta concurred with Cross, saying recent movements in the exchange rate were driven by money supply growth.
“A spike in the parallel market rate normally coincides with ZWL payments by the government, so we then have all this ZWL liquidity chasing dollars on the market, causing a depreciation in the rate.
“This could possibly signal a turnback into an inflationary environment considering the steep rate at which the ZWL is depreciating. A weaker ZWL also means eroded purchasing power for consumers and decreased volumes for corporates.
“Suggestions would either be to limit bulk ZWL payments by the government unless necessary or pair these payments with liquidity mopping,” she said.
Another economist, Prosper Chitambara, said the country’s broad money supply had increased at an unsustainable rate.
“It creates inflationary pressures on the exchange rate, which results in exchange rate depreciation and widening of the currency premium,” he said. newsdesk@fingaz.co.zw
