Zimbabwe’s reserve money balance decreased by 8,17 percent to $25,94 billion in the week ending December 31, 2021, data from the Reserve Bank of Zimbabwe (RBZ) shows.
The decrease in reserve money is from a previous week ending December 24, 2021 position of $28,25 billion.
Reserve money refers to currency in circulation and deposits with commercial banks as well as bank deposits to the same. The decline in reserve money growth entails that the country is at the centre of lowering inflationary pressures.
During the period, currency issued by the central bank slightly increased by $1,07 million to $5,15 billion.
“Partially offsetting the decrease was an increase of $1,07 million in currency issued,” the Reserve Bank of Zimbabwe said in the latest reserve money update.
The drop in reserve money was due to a fall of $1,99 billion in banks’ liquidity at the central bank, coupled with a decrease of $319,60 million in required reserves
Monetary reserve refers to the holdings of currencies, precious metals, and other highly liquid assets used to redeem national currencies and bank deposits and to meet current and near-term financial obligations by a country’s central bank, government treasury, or other monetary authority.
During the 2021 Monetary policy the apex bank said it would maintain its conservative monetary targeting framework.
The RBZ said this would be achieved by reducing the quarterly reserve money growth from the 25 percent quarterly target in 2020 to 22,5 percent per quarter in 2021.
Authorities contend that the current stability in inflation and exchange rate movement needs to be safeguarded, maintained and sustained to support the economy’s growth trajectory.
The reserve money target of 22,5 percent was consistent with the targeted end of year inflation of below 10 percent and the projected 7,4 percent economic growth rate of the economy for 2021.
However, by mid-2021 the reserve money target was reduced to 20 percent.
Recently, The central bank revised reserve money targets from 20 percent to 10 percent for the fourth quarter of 2021 and the first two quarters of 2022.
According to the Monetary Policy Committee, the decision to review the reserve money growth targets was informed by the reserve money growth out-turn of 9,3 percent achieved in the third quarter ended 30 September 2021.
Currently, reserve money growth is at 27,07 percent, hence it is questionable whether the 10 percent target for the fourth quarter will be attained considering that the quarter is drawing to an end.