Reserve Bank of Zimbabwe (RBZ) has revealed that reserve money increased by ZWL$1 037 billion owing to the purchase of foreign exchange from the market, among other economic activities.
Reserve money refers to currency in circulation and deposits with commercial banks and other deposits to the same. In a recent update, the central bank said reserve money increased by ZW1 037 million over the week ending 4 September 2020, largely reflecting an increase of ZW$969 million in banks’ deposits at the RBZ.
The increase in banks’ liquidity was attributable to the purchase of foreign exchange from the market by RBZ and government expenditures, all of which raised the deposit levels in the banking system. Foreign exchange purchases by RBZ are mainly for funding the auction. Statutory required reserves rose to ZWL$1.2 billion while banks RTGS liquidity rose ZWL$8.5 billion to ZWL$9.5 million.
Generally, the decrease in reserve money means that the country is in the right direction towards reducing inflationary pressures, which may in turn contribute to instability on the exchange rate. Market watchers are optimistic that measures taken in place by the RBZ which saw the closure of Econet Agent lines among other measures will serve as shock absorbers to stave off the instability pressures likely to affect exchange rates.