The Reserve Bank of Zimbabwe has reported that annual broad money supply growth increased from $7,54 billion to $9,85 billion in January. The broad money supply is made up mainly of commercial bank deposits.
In its Economic Review, the Reserve Bank of Zimbabwe (RBZ) attributed the annual growth in money supply, largely, to expansions in demand deposits, currency in circulation and time deposits.
An unnamed top banker who spoke to the NewsDay believes that the exchange rate was fueling the inflation rate. The banker said:
I think in this case, what is driving the inflation rate more is the exchange rate rather than money supply. However, over time, one would want to say if you arrest the growth in money supply, there won’t be much money to chase even in that exchange rate. If you tighten on your money creation, yes, you should see inflation responding, but in our case, it’s because of the high exchange rate pass through effects to prices.
Persistence Gwanyanya, a financial expert said that based on the reduction of the month-on-month growth, it was still too early to establish whether the government’s strategy of controlling money supply was working.
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More: NewsDay