Wednesday , January 27 2021

Development of money supply slows down – Bulawayo24 News



Zimbabwe's annual broad money supply (various forms of money) increased by only 1.18 percent in August to yield a 38 percent increase for the year to August 2018, compared to 47 percent annual growth noted in July, the Zimbabwe Reserve Bank (RBZ) said.

The broad amount of money – such as banknotes and coins, shorter bank deposits, bank deposits with three months notice, money market shares and two-year maturities – are driven by demand deposits and currency in circulation. Month-by-month broad cash increased by 1.18 percent from $ 9.682 billion in July 2018 to $ 9.776 billion in August 2018, said RBZ. Prices are rising when money is growing too fast – faster than productivity – because a situation arises where relatively more money chases relatively fewer goods.

The central bank said in its monthly economic update for August 2018 that the large amount of money rose to $ 9.797 billion, compared to $ 7 708 billion in 12 months to August 2017.

"Growth in money supply reflected annual increases in demand bills, 48.93 percent and circulation currencies, 131.01 percent. The increases are partially offset by annual decreases of 6.43 percent and 5.03 percent in negotiating certificates of deposits (NCD) three respectively time settlements, says RBZ.

Wide funds in circulation consisted of demand deposits, 79.05 percent; time deposits, 15.56 percent; currency in circulation, 4.71 percent; and negotiation of deposit (NCD), 0.68 percent. The money supply is the entire stock of currency and other liquid instruments that circulate in a country's economy from a certain point of time. The amount of money may include cash, coins and balances held in the check and savings account.

Economists analyze the amount of money and develop policies that relate to it by controlling interest rates and increasing or reducing money in the economy. In an economy where the central bank has full autonomy in monetary policy, an increase in money supply usually reduces interest rates, which in turn gives more investment and puts more money into the hands of consumers, thereby stimulating spending.

Companies respond by ordering more raw materials and increasing production. The increased business activity increases the demand for labor. The opposite can occur if the amount of money falls or when growth is falling. Private sector credit recorded an annual growth of 3.94 percent in August 2018, compared to an annual growth rate of 4.80 percent the previous month. Private sector credit rose 2.16 percent monthly, from $ 3,646 million in July 2018 to $ 3,244 million in August 2018.

Credit to the private sector was used for stockbuilding (24.07 percent); consumer goods (21.25 percent); fixed capital investment (12.45 percent); and before and after freight financing (1.77 percent). Other recurring expenses accounted for 40.46 percent of the total outstanding loans during the month's review.

Households responded to sector level for 26.84 percent of credit, followed by agriculture, 18.96 percent; distribution, 13.36 percent; services, 12.32 percent; manufacturing, 10.91 percent; financial organizations and investments, 7.40 percent; mining, 4.51 percent; construction, 3.14 percent; and transport and communication, 2.11 percent.


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