Almot Maqolo, Staff Writer 
ZIMBABWE’S broad money increased by 12,62 percent to $3,59 trillion in April 2023, compared to $3,19 trillion recorded in March, the latest figures from the Reserve Bank of Zimbabwe (RBZ) show.
This comes as a number of analysts have blamed money supply growth for the Zimdollar’s spectacular depreciation against major currencies, which has been witnessed lately.
According to the RBZ, the increase in money supply during the month reflected an expansion of $279,72 billion and $122,91 billion in foreign currency deposits and local currency components, respectively.
“The money stock was comprised of foreign currency deposits, 59,71 percent; local currency deposits, 40,09 percent and currency in circulation, 0,20 percent,” RBZ said.
“Annual increase in broad money largely reflected changes in net claims on government and credit to the private sector of $707,34 billion and ZW$1,54 trillion, respectively.“
On an annual basis, broad money saw a growth of 436,01 percent. From the 442,41 percent reported for March 2023.
“The foreign currency component of broad money, which explains the bulk of the increase, rose by 611,14 percent, while the local currency component increased by 292,69 percent,” the apex bank said.
“The growth in foreign currency deposits from $302,16 billion in April 2022 to $2,14 trillion in April 2023, was largely attributable to valuation changes related to the movement in the exchange rate,” it added.
The interbank market exchange rate declined from $159,35 to $1 047,44 per US dollar throughout the course of the year ending in April 2023.
“Annual increase in broad money largely reflected changes in net claims on government and credit to the private sector of $707,34 billion and ZW$1,54 trillion, respectively.”
Agriculture and families received the majority of the private sector’s credit, accounting for 24,31 percent and 21,58 percent of the total, respectively.
On the other hand, 13,88 percent and 10,92 percent of the loan went to the manufacturing and distribution sectors, respectively.
As we enter the second half of the year, FBC Securities believes liquidity management will continue to be essential for controlling inflation and exchange rate fluctuations.
“Without careful liquidity management, increased money supply may have a destabilising effect on the economy in H2,” FBC Securities said in its latest first half of 2023 review and outlook report.
The research firm said economic stability is threatened by currency dynamics, particularly distortions brought on by an expanding parallel market rate premium.
“We believe convergence of the official and parallel market rate is a possibility, hinged primarily on the accelerated liberalisation of the foreign exchange market, combined with continued efforts to maintain an appropriately tight monetary policy for the sustainable restoration of macroeconomic stability,” it said.
Experts say rising money supply and high demand for the US dollar, as well as a confidence deficit in the country’s monetary and fiscal authorities, have piled pressure on the domestic unit, resulting in the recent spikes in both the official and parallel market exchange rates. However, authorities have instituted a series of measures aimed at stabilising the local unit.
In recent weeks, there has been a slowdown in price increases, owing to a stabilisation of the exchange rate and some easing of prices at the international level.
