While authorities are pointing to “saboteurs” for driving up inflation and weakening the currency, latest Reserve Bank of Zimbabwe data is pointing elsewhere – to RBZ itself.
According to central bank’s latest report on money supply, reserve money – the amount of currency in circulation plus deposits with central bank – went up nearly Z$568 million in the week from June 12 to June 19, to reach Z$13.9 billion. However, this was only offset by a cut in the statutory reserve ratio.
The rise in reserve money over that week was made up of increases of Z$417.71 million in RTGS balances, Z$63.94 million in the new currency issued and other deposits worth Z$86.21 million.

“Partially offsetting these increases was a decline of Z$617.53 million in required reserves, as a result of the Monetary Policy Committee (MPC)’s decision to reduce the required reserve ratio (RRR) from 4.5% to 2.5%, in order to promote bank lending to the economy,” the RBZ report says.
Currency in circulation – the notes and coins issued by RBZ – stood at Z$1.6 billion over that period.
RBZ and inflation
Zimbabwe’s annual inflation rose to 785.55% in May from 765.57% in April. Inflation has accelerated after money supply grew in the last half of 2019. This was largely due to State subsidies and Treasury Bill discounts. There was a 307% growth in reserve money between June and December last year.
In February, RBZ said reserve money went up from Z$3.3 billion in 2018 to Z$8.8 billion in December 2019. A more recent monthly report said reserve money ended the year Z$10.3 billion.
Late last year, the MPC warned that the 2020 National Budget “has a potential expansionary impact on money supply, which limits the scope for tightening of monetary policy as required under the Bank’s disinflation programme.”
At its last meeting on May 22, the MPC urged “more active” use of Open Market Operations (OMO) Bills to deal with any identified excess liquidity balances in the market.