News / National
RBZ mops up ZW$31,6 billion in four months
24 May 2022 at 07:26hrs | Views
THE Reserve Bank of Zimbabwe (RBZ) managed to mop up excess liquidity amounting to ZW$31,6 billion in the last four months of 2021 as the monetary authority upped the gear towards preserving the local currency's stability.
Excess liquidity/cash position is when the balance exceeds the actual working capital cash needed, thereby becoming excess cash, or cash that is not necessary to the firm's financial operations unless it is reinvested for other purposes.
The monetary authorities believe that if such balances are not mopped, several companies may be tempted to invade the parallel market and destabilise exchange rates for speculative purposes.
The RBZ has been implementing the excess cash mop up exercise through the issuance of Open Market Operations (OMO) securities through Non-Negotiable-Certificates of Deposits and Savings, which offers banks the opportunity to deposit excess cash with the central bank.
"During the quarter, OMO securities issued by the RBZ rose from ZW$41, 19 billion in the third quarter to ZW$72, 82 billion in December 2021, thus mopping up excess liquidity amounting to ZW$31,63 billion from the market during the quarter under review," latest RBZ statistics said.
The period also saw reserve money stock stood at ZW$25,5 billion in the fourth quarter of 2021, compared to the target of ZW$28,9 billion, which translated to a quarterly growth of -1.14%, against a targeted growth of 10%.
"The reserve money quarter- on quarter growth target was reduced from 20% to 10%, in the fourth quarter of 2021.The quarterly growth in reserve money was contained within target during the fourth quarter of 2021," said RBZ.
The lower reserve money stock, in part, reflected liquidity mopping by the Central Bank through open market operations.
"Mopping was largely through issuance of securities (non-negotiable certificates of deposits and savings bonds), supported by the liquidity withdrawing impact of net Government revenue collections and net foreign exchange selling by the Reserve Bank," the central bank said.
Economic analyst, Prosper Chitambara, said the sustained trend is a step in the right direction, but hinted that deeper reforms are still required if long term benefits are to be achieved.
"The quantum of mopped up excess cash reflects the Monetary Policy stance which the RBZ is pursuing. This will obviously reign in the parallel market exchange rate volatility.
"However, more still needs to be done as far as maintaining money supply growth at sustainable levels if long term economic stability is to be achieved," he said.
Excess liquidity/cash position is when the balance exceeds the actual working capital cash needed, thereby becoming excess cash, or cash that is not necessary to the firm's financial operations unless it is reinvested for other purposes.
The monetary authorities believe that if such balances are not mopped, several companies may be tempted to invade the parallel market and destabilise exchange rates for speculative purposes.
The RBZ has been implementing the excess cash mop up exercise through the issuance of Open Market Operations (OMO) securities through Non-Negotiable-Certificates of Deposits and Savings, which offers banks the opportunity to deposit excess cash with the central bank.
"During the quarter, OMO securities issued by the RBZ rose from ZW$41, 19 billion in the third quarter to ZW$72, 82 billion in December 2021, thus mopping up excess liquidity amounting to ZW$31,63 billion from the market during the quarter under review," latest RBZ statistics said.
The period also saw reserve money stock stood at ZW$25,5 billion in the fourth quarter of 2021, compared to the target of ZW$28,9 billion, which translated to a quarterly growth of -1.14%, against a targeted growth of 10%.
"The reserve money quarter- on quarter growth target was reduced from 20% to 10%, in the fourth quarter of 2021.The quarterly growth in reserve money was contained within target during the fourth quarter of 2021," said RBZ.
The lower reserve money stock, in part, reflected liquidity mopping by the Central Bank through open market operations.
"Mopping was largely through issuance of securities (non-negotiable certificates of deposits and savings bonds), supported by the liquidity withdrawing impact of net Government revenue collections and net foreign exchange selling by the Reserve Bank," the central bank said.
Economic analyst, Prosper Chitambara, said the sustained trend is a step in the right direction, but hinted that deeper reforms are still required if long term benefits are to be achieved.
"The quantum of mopped up excess cash reflects the Monetary Policy stance which the RBZ is pursuing. This will obviously reign in the parallel market exchange rate volatility.
"However, more still needs to be done as far as maintaining money supply growth at sustainable levels if long term economic stability is to be achieved," he said.
Source - NewZimbabwe
