ANNUAL broad money supply continued on an upward trend, rising to 862,6% in July from 779% in June driven by an increase in domestic credit which grew by
924,7% to $154,8 billion during the period.
Analysts said the high money supply growth and increased credit expansion was likely to fuel inflation, already topping 1 000% year-on-year.
Statistics released by the Reserve Bank of Zimbabwe this week showed that the country’s money supply, which opened the year at 520%, had increased by 342,6 percentage points inside six months to record 862,6%.
“It’s an understatement,” said John Robertson, commenting on the new money supply figure. “The figure does not include the $120 trillion printed to buy foreign currency to pay the IMF (International Monetary Fund).”
Robertson’s comment reinforced entrenched fears among economic players that official money supply growth figures, as well as inflation figures, have been understated by a bureaucratic system to understate the gravity of the country’s economic woes and subdue any potential for social upheaval.
Money supply is the generation of new money – in other words, an addition to stock of money already in circulation.
While the major reason for such growth in Zimbabwe has been credit to the government, banking institutions have become major contributors to government debt through statutory reserve requirements and recently introduced economic and financial stabilization bonds.
The large chunks of money from banking institutions at the Reserve Bank have largely been lent to the government to meet its expenses or used by the central bank in quasi-fiscal operations propping up ailing parastatals or the struggling agricultural sector.
Gono has previously said high growth in money supply had been occasioned by money printing to buy foreign currency to settle foreign debts or pay for critical import bills.
“Net claims on government contributed 53% of the domestic credit, mainly in the form of Treasury Bills,” the central bank said in a report accompanying its latest figures.
Quasi money and narrow money for the period under review also shot up to 892,1% and 868,9% respectively, from 769,6% and 763,2 June.
Metropolitan Bank’s group economist, Brains Muchemwa, said the new money supply growth were high.
“The large increases are a reflection of how the monetary bases in the economy are ballooning,” said Muchemwa.
He said high domestic credit to government had been the major driver to increased money supply growth. Analysts said money supply was likely to grow at an unprecedented rate next year due to increased domestic borrowing by government to meet its expenditure commitments unlikely to get enough from shrinking revenue streams.