By Alois Vinga
ECONOMIC experts have hailed the government’s economic reforms as a key enabler for the current annual 410% foreign currency deposits upsurge amid calls to further tighten the policies for sustained benefits.
This comes after the Reserve Bank of Zimbabwe (RBZ) monthly economic review for April 2021 confirmed there was remarkable growth in the segment’s deposits.
“Foreign currency deposits included in broad money recorded an annual growth of 409.68%, from $19.46 billion in April 2020 to$117.77 billion in April 2021. The increase partly reflected valuation changes owing to exchange rate movement,” the report said.
The document said during the period under review the exchange rate moved from a fixed rate of $25 to $84.50 per US$1 in April 2021, following the introduction of the auction system.
The report noted that on an annual basis, local currency deposits registered a growth of 343.74%, while currency in circulation increased by 73.78%.
Authorities have been implementing a raft of measures that have seen the Zimbabwe dollar sustaining relative stability and improved foreign currency inflows into the economy.
In June 2020, the RBZ also launched the foreign currency exchange platform which has provided a formal platform for companies to source for US$, a development that has partly stimulated confidence levels.
Analyst at Ethos Capital Partners, Yona Menon attributed the upsurge to rising confidence inspired by the thorough reforms.
“Over the same period according to RBZ stats the US$ to Zim dollar exchange rate depreciated from $25 to $84.53, which places the real growth in foreign currency deposits at 79%. This is still a positive outcome, although it would be useful to know the source of the foreign currency deposits to get a better understanding of what is happening, “he said.
Menon underscored that the figures could be a reflection that growing confidence in the banking sector is encouraging more deposits from consumer banking clients.
“Notably, most banks are offering remittance services and low-cost forex accounts which customers can withdraw from in hard currency. It could also be reflective of the increased influence of the foreign currency auction system and more RBZ oversight pushing corporates and SMEs to formally bank their forex,” he said.
However, economist John Robertson urged authorities to provide guarantees to enable the banking sector to extend foreign currency loans to local companies.