Monetary supply up 40%


Discounted market capitalisations are prevailing on the Zimbabwe Stock Exchange.

ZIMBABWE’S annual broad money increased by 40,81% to US$9,14 billion in June from US$6,49 billion in the same period in 2017 driven by a growth in transferable deposits and negotiable certificates of deposit, a treasury report says.

By Kudakwashe Chideme

Broad Money supply (M3) is a measure of the money in circulation which includes physical currency and demand deposits. It is also considered an important instrument for controlling inflation.

Transferrable deposits and negotiable certificates of deposits grew by 93, 21% and 1, 79% respectively.

Time deposits, however, offset the increase with a decline of 5,18%.

According to the report, bond notes and coins in circulation outside the banking system increased from US$175,77 million in June 2017 to US$379,20 million in June 2018. The continuous rise in money supply has further triggered inflation, which official figures put at 2,9% as at June. Economists say it does not reflect actual market trends.

“Inflation during the second quarter remained generally low, despite build-up of some inflationary pressures, particularly driven by parallel exchange market rates,” reads the report.

“The first half inflation profile reflects a slowdown compared to the last half of 2017. When compared to the same period in 2017, the profile, however, indicates a significant rise in inflation during the first half of 2018.”
The increase in broad money also translated to growth in domestic credit, of 47,34% up from US$8,43 billion in June 2017 to US$12,42 billion in June 2018.

The growth was underpinned by an expansion of 73,9% in net credit to government which stood at US$7,7 billion in June 2018 up from US$4,43 billion in June 2017.

Credit to the private sector increased by 11,42% from US$4,45 billion in June 2017.

Zimbabwe bank deposits are mainly short term in nature with the sectorial distribution of credit to the private sector skewed towards sectors that have a short term turn around.

Sectors requiring long term capital such as transport, communication, mining and construction received the least share of credit. In the same report, treasury noted that activity on the Zimbabwe Stock Exchange (ZSE) was characterised with mixed trading and volatility as investors maintained a cautious approach ahead of elections.
“The mining index however, gained 28, 9% during the second quarter opening at 125,1 points and closing stronger at 161,3 points” Accordingly, total market capitalisation of the ZSE stood at US$9, 79 billion in June 2018, up from US$8, 29 billion at the beginning of April.