Paul Nyakazeya
20 July 2007
MONEY supply growth (M3) continued marching north to a new record of 2 083,2% in February from 1 638,4% the previous month, officials figures said this week.
According to Reserve Bank figures released this week, money supply growth rose by 444,8 percentage points to 2 083,2% in February from January's figure of 1 638,4%.
The Reserve Bank attributed the increase to a massive surge in credit to the private sector, government and public enterprises.
"The growth in broad money was largely driven by a 3 458,7% increase in credit to the private sector," the Reserve Bank said.
Money supply is the total supply of money in circulation in a given country's economy at a given time. It is considered an important instrument to control inflation.
"Credit to government and public enterprises grew by 2 022,3% and 756% respectively while overall domestic credit grew by 2 692,3% from $59,1 billion in February last year to $1 649,4 billion in February this year," said the bank.
Narrow and quasi-money growth also rose from 1 588,5% and 1 720,4% to 2 100,9% and 2 151,9% respectively during the same period.
Analysts this week said money supply for June was above 4 000% due to expansionary fiscal and monetary policies being pursued by government and the Reserve Bank.
In his monetary policy in January this year, central bank governor Gideon Gono said the bank would reduce annual broad money supply growth from over 1 000% to between 415% and 500% by December 2007. He forecast money supply to come down to below 65% by December 2008.
Analysts however said the figure was likely to be over 6 000% by December due to the printing of money by the Reserve Bank to buy foreign currency on the parallel market to import grain, fuel and electricity.
Money supply will continue to rise due to increased government expenditure to fund salaries, subsidies manufacturer after ordering that shops reduce their prices by half, food, fuel, wheat and electricity imports.
In May government is said to have borrowed money from the Reserve Bank to fund its bloated wage bill.
Most ministries, which are reported to have spent their budget allocations for this year, are pushing for a supplementary budget.
"Reserve money increased by $210 billion to $583,9 billion in February from $373,7 billon in January 2007. This was a result of increases in currency issued ($147,6 billion) required reserves ($6,8 billion) and other deposits ($1 billion). Excess reserves, however declined by $6,8 billion," the bank said.
Meanwhile banks this week continued to scramble for the scarce liquidity on the market emanating from their funding of cash requirements.
The Reserve Bank's cash withdrawal limit increases from $3 million and $1,5 million for corporates and individuals to $20 million and $10 million respectively saw banks transferring huge amounts of money from their balance sheets to fund the cash withdrawals, thereby creating huge market shortages.
Be the first to Write a Comment!
Copyright © 2007 Zimbabwe Independent. All rights reserved. Distributed by AllAfrica Global Media (allAfrica.com). To contact the copyright holder directly for corrections — or for permission to republish or make other authorized use of this material, click here.
AllAfrica aggregates and indexes content from over 125 African news organizations, plus more than 200 other sources, who are responsible for their own reporting and views. Articles and commentaries that identify allAfrica.com as the publisher are produced or commissioned by AllAfrica.
