Zimbabwe govt injects ZWG75bn into financial system in 7 months

The Zimbabwean Government injected more than ZWG75 billion into the financial system during the first seven months of 2026 as authorities sought to improve liquidity, support bank lending and sustain economic growth while keeping inflation under control.

According to the Reserve Bank of Zimbabwe (RBZ), total liquidity injections amounted to ZWG75.1 billion between January 2 and August 4, largely driven by Government expenditure and the central bank's purchase of export surrender proceeds.

RBZ Governor John Mushayavanhu said the liquidity support was consistent with the central bank's statutory mandate to safeguard the stability and proper functioning of the financial system.

"Liquidity dynamics in the economy were largely driven by Government and foreign exchange operations," Mushayavanhu said.

He said Government expenditure was the largest source of liquidity during the period, contributing ZWG42.3 billion, while the RBZ injected a further ZWG32.8 billion through the purchase of export surrender proceeds.

The liquidity injections were partly offset by withdrawals from the financial system. Government revenue collections accounted for ZWG46.1 billion in withdrawals, while RBZ foreign currency sales removed another ZWG26.9 billion.

Other operations, including statutory reserve transfers and Treasury Bill issuances and maturities, resulted in a net injection of ZWG1.9 billion.

Overall, the financial system recorded a net liquidity injection of ZWG4 billion, despite gross liquidity inflows of more than ZWG75 billion.

Mushayavanhu said the central bank's foreign exchange management strategy had helped eliminate foreign currency backlogs while supporting exchange rate stability.

"The adequacy of foreign exchange has ensured that the market clears, as attested by the absence of foreign currency backlogs, outstanding foreign payment invoices and inflationary pressures arising from ZiG liquidity, as reserves fully back every ZiG in the system," he said.

Zimbabwe recorded US$10.72 billion in foreign currency receipts during the first half of 2026, supported by strong export earnings and resilient diaspora remittances.

The increased foreign currency inflows have enabled the RBZ to steadily accumulate reserves, which the central bank says has strengthened confidence in the Zimbabwe Gold (ZiG) currency.

Meanwhile, broad money supply, measured by M3, increased by 31.4 percent to ZWG142.01 billion in June 2026, from ZWG108.09 billion at the end of 2025.

The increase was driven by growth in both local and foreign currency deposits.

On an annual basis, broad money growth stood at 45.9 percent in June, significantly lower than the 127.8 percent recorded during the same period a year earlier.

Mushayavanhu said Zimbabwe was experiencing a significant change in its monetary dynamics, with growth in money supply no longer translating into a corresponding increase in inflation.

He said annual broad money growth had remained elevated since October 2025 even as inflation declined sharply.

In December 2025, money supply grew by 37 percent year-on-year while inflation fell to 15 percent. The trend continued into 2026, with M3 growth increasing from 38 percent in January to 46 percent in June, while inflation remained below 5 percent.

"The structural weakening in the underlying money-inflation relationship suggests that exchange rate stability, fiscal restraint and improved market confidence are playing a significant role in pulling down inflation," Mushayavanhu said.

He said the RBZ would maintain a prudent monetary policy stance focused on carefully managing money supply to anchor inflation expectations.

"The successful anchoring of inflation expectations has allowed the Reserve Bank to increase money supply to support the envisaged growth without stoking inflationary pressures," he said.

As part of its liquidity management framework, the central bank also introduced the ZiG Domestic Targeted Deposit Facility (ZiGDTDF) during the first half of the year.

The facility complements negotiable non-call certificates of deposit (NNCDs), whose outstanding balance stood at ZWG7.7 billion as of August 4.

Two NNCD issuances conducted in June attracted ZWG466.6 million against an offer of ZWG500 million, indicating strong investor demand. Outstanding balances under the facility stood at ZWG356.6 million as of July 17.

Mushayavanhu said liquidity conditions remained within the central bank's optimal target range throughout the first half of the year despite the expansion in money supply.

The RBZ's latest assessment points to a monetary environment in which authorities are seeking to balance increased liquidity to support economic activity with tighter management of inflation and exchange-rate risks.

The challenge for policymakers will be to sustain this balance as economic activity expands without allowing increased liquidity to undermine the stability achieved in the ZiG and reignite inflationary pressures.