The Reserve Bank of Zimbabwe (RBZ) has blamed the country’s currency tumble on non-monetary factors despite statistics revealing that reserve money grew by as much as 307% year-on-year.
The RBZ on Monday released monetary statistics showing that reserve money had grown to Z$13,4 billion by the second week of June 2020, a 300% growth from just above Z$3 billion in June 2019.
Between February and March, reserve money grew by as much as 24% and this coincided with a currency tumble, with the Zimbabwe dollar depreciating to 70:1 to the US dollar from 23:1 in January.
Despite the evident money supply growth against limited foreign currency supplies, the RBZ has blamed the Zimbabwe dollar’s loss of value on “non-monetary factors such as negative perceptions, adverse expectations, and speculative tendencies of economic agents.”
The depreciation was divorced from economic fundamentals, it said.
The central bank said price determination in the economy is being established on the basis of expectations about the depreciation of the exchange rate and prices that will exist in the future.
“This forward pricing system or practice of front-loading anticipated exchange rates in the current prices based on fear factor, is detrimental to the economy, as it leads to self-fulfilling depreciation in the exchange rate, with negative knock-on effects on prices,” reads part of the statement.
Meanwhile the Financial Intelligence Unit, housed under the central bank said Monday, it will cause the arrest of any person or mobile phone used to advertise illegal foreign currency activities.
“The FIU, in collaboration with the police, banks, mobile money / mobile phone service providers and relevant regulatory agencies, has embarked on an exercise to identify and take action against individuals who create, advertise on or participate (actively or passively) in WhatsApp groups or other platforms for illegal foreign currency trading.”