Gold coins in smaller units to be sold in Nov
...Inflation projected to decline
BUSINESS REPORTER
The Reserve Bank of Zimbabwe (RBZ) will release gold coins in smaller units with effect from mid-November in response to public demand as it seeks to mop excess local currency balances blamed for fuelling the foreign currency parallel market.
The introduction of the Mosi-oa-Tunya coins in smaller units of a tenth ounce, quarter ounce and half ounce for sale comes after the sale of gold coins began on July 25.
The features, characteristics and the sale terms and conditions shall remain the same as the current trading arrangements of the gold coins in circulation, central bank chief John Mangudya said Thursday.
There has been an increase uptake of the gold coins as they are seen as a store of value.
Statistics show that 4475 gold coins had been sold as of August 10, realising ZWL$3.7bn.
Of that amount, 90% was paid in local currency and the balance in foreign currency, and evenly distributed throughout the agents, Mangudya said.
“The high demand for the gold coins will assist in mopping up liquidity from the market and thus strengthen the demand and enhance the value of the local currency. The Bank shall continue to release additional gold coins into the market on an ongoing basis in line with demand,” he said.
RBZ also introduced statutory reserves on foreign currency deposits to provide an asset buffer amid a spike in foreign currency denominated loans.
Mangudya said foreign currency-denominated loans now constitute more than half of the total loans in the economy and there is a need to provide that buffer to ensure continued safety and soundness of the domestic banking sector.
“In this regard, with effect from 1 September 2022, statutory reserve requirements shall be extended to foreign currency deposits at rates of 5% for call deposits and 2.5% for time and savings deposits. The differential system is to encourage banks to promote savings deposits that are necessary to support long term productive lending in foreign currency,” Mangudya said.
There has been a spike in foreign currency-denominated loans to 65.87% of the total loans and advances as at June 30 from 36.87% as at December 31, 2021.
Aggregate banking sector loans and advances jumped to ZWL$603.14bn as at June 30 from ZWL$229.94bn as at December 31,2021, attributed to the translation of foreign currency denominated loans.
As at 30 June 2022, foreign currency denominated loans constituted 65.87% of total banking sector loans, an increase from 36.87% reported as at 31 December 2021.
Mangudya said the tight monetary policy stance, together with the favourable uptake of Mosi-oa-Tunya gold coins as an alternative stable financial product for store of value and for mopping up excess liquidity, will support the stability in the exchange rate and sustain disinflation witnessed towards the end of July 2022 and in August 2022.
This, he said, will also be supported by the government’s strong will in putting in place measures that deal with factors that destabilise the foreign exchange market.
“As such, with month-on-month inflation having declined from 30.7% in June 2022 to 25.6% in July 2022, the Bank anticipates the monthly inflation to continue to progressively decline by between 3 to 10% in the outlook period,” Mangudya said.
He said RBZ has conducted study tours as it explores introduction of the central bank digital currency (CBDC) on a phased approach.
Mangudya said the bank has developed a public consultation paper on CBDC to be released soon.
The consultation paper is aimed at fostering a broad and transparent public dialogue regarding the potential benefits and risks of CBDC.
The public will have a period of 90 days from the date of release to submit their comments to RBZ, Mangudya said.
HIGHLIGHTS
*Foreign currency retention threshold maintained.
*Limit on forex transactions on individuals and MSMES increased to US$5000 per transaction from US$500 per week
* The limit for qualifying transactions under the willing-buyer willing-seller foreign exchange trading system doubled to US$20,000 per week
*Minimum capital requirements for all categories of banks will be maintained at the current levels
*Exports projected to close the year US$7.35bn from US$6.359bn in 2021
*Merchandise imports are projected to end the year at US$8.082bn up from US$7.138bn, driven by increases in grain, fuel, machinery and raw material imports
