Central bank hailed for keeping money supply growth under check

By Davison Vandira

Economists have commended the Reserve Bank of Zimbabwe (RBZ) for maintaining a tight grip on reserve money by mopping up excess liquidity in its endeavor to consolidate price stability.

Reserve money for the past two weeks fell by ZWL$181.07 million to ZWL$22.44 billion, largely reflecting a decrease of ZWL$464.85 million in banks’ RTGS balances at the central bank. 

Reserve money which is also known as high-powered money, or monetary base is important in regulating money supply growth.

It is one of the key tools used in the monetary policy to decide the level of liquidity in the market and the price level.

Events of the past year where the central bank has maintained a hawk’s eye on liquidity levels have been hailed for ensuring macroeconomic stability.

Economist Titus Mukove said, “The current efforts by the central bank through strengthening of the Open Market Operations in mopping up excess liquidity will further stabilise the prices since the economy has already taken a downward trend in the inflation rate as the rate of increase in the prices levels continues to fall.”

“Zimbabwe has been experiencing inflation due to a number of factors, among them business tracking constant changes in parallel market exchange rates, which all prices were referenced upon. This has since changed since the induction of measures to regulate and discipline currency manipulators,” said economic analyst Persistence Gwanyanya.

The continued monetary and fiscal discipline currently obtaining in the country will be key in ensuring the local currency sustains the current stability as the market grows confidence in the use of the Zimbabwe dollar.

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