Foreign Currency Deposits Rise 778%

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By Alois Vinga

FOREIGN currency deposits held by banks have risen by 778,9 % inside a year on the back of economic reforms and increasing confidence levels in the banking sector among other factors.

The latest monthly economic review published by the Reserve Bank of Zimbabwe (RBZ) covering the period February 2021 says both local and foreign currencies have recorded significant increases.

“Foreign currency deposits recorded an annual growth of 778,92%, from an equivalent of ZW$12.48 billion in February 2020 to ZW$109,66 billion in February 2021. On an annual basis, local currency deposits registered a growth of 362,91%, while currency in circulation increased by 27,22%,” the report said.

The report partly credits the increase as a reflection of valuation changes, owing to movement of the exchange rate, from ZW$17,95 per US$1 in February 2020 to ZW$83,89 per US$1 in February 2021.

Commenting on the figures, economist, Doctor Prosper Chitambara attributed the improvements to factors associated with a recovering economy.

“Lately, there has been an improvement of incomes on the back of a recovering economy prompting most people to prefer to hold their savings in foreign currency. To some extent, members of the public are gaining confidence in the banking sector due to the prevailing degree of stability,” he said.

Chitambara however called for deeper reforms in the parastatals and a radical anti-corruption stance as measures that will boost confidence in the economy.

During the period under review, the money stock (M3) consisted of foreign currency deposits, $109.66 billion equivalent to 48 % of total money, while local currency transferrable deposits amounted to ZW$99,91 billion ; time deposits, ZW$13,95 billion 6,17%; negotiable certificates of deposits, ZW$1,46 billion; and currency in circulation, ZW$1,21 billion.

On a month-on-month basis, credit to the private sector increased by 9.5 % to ZW$91.93 billion .

Credit to the private sector was mainly extended towards agriculture, 31.36%; households, 13,91%; distribution, 13,18%; financial organisations, 12.87%; manufacturing, 10.14%; and mining, 8.62%.