Vol. 25 No. 33


Week Ending
18th August 2023
Weekly Economic
Highlights
TABLE OF CONTENTS


BANK POLICY RATE, EXCHANGE RATE AND INFLATION

1.
OVERVIEW

This report provides an analysis of the developments in the money and capital markets for the
week ending 18th August 2023. The report also covers developments in the tobacco, mineral
commodities, and stock markets during the week. The last section of the report presents a review
of the policy rate, exchange rate premium and inflation.


The Zimbabwe Stock Exchange (ZSE) and Victoria Falls Stock Exchange (VEFX) traded in a
positive trajectory during the week under analysis. The value of transactions processed through
the National Payment System (NPS) were lower during the week under review compared to the
previous week, largely reflecting declines in RTGS and POS transactions.

The deposit rates for the domestic currency deposits mostly remained largely unchanged except
for 1 month and 3 months maximum deposit rates which increased marginally.


The volume and value of tobacco sales increased during the week under review. The the golden
leaf was sold at a lower price during the same week of analysis.

2.
INTEREST RATES

Local Currency (ZWL) Deposit Rates

During the week ending 18th August 2023, minimum and maximum deposit rates for all classes
of deposits were unchanged save for maximum ZWL deposit rates for deposits of 1 month and
3 month tenor which registered an increases on the back of tight liquidity conditions in the
economy.

Table 1: Average Deposit Rates (per annum)
Date
Savings deposits (%)

1- Month deposit
rates (%)

3- Month deposit
rates (%)

6- Month deposit
rates (%)

12- Month deposit
rates (%)

Minimum
(%)
Maximum
(%)
Minimum
(%)
Maximum
(%)
Minimum
(%)
Maximum
(%)
Minimum
(%)
Maximum
(%)
Minimum
(%)
Maximum
(%)
28-Jul-23

04-Aug-23


11-Aug-23

18-Aug-23


Source: Reserve Bank of Zimbabwe, 2023

Local Currency Lending Rates

The minimum ZWL lending rates for individual clients registered an increase while those for
corporate clients registered a decline during the week under analysis. Minimum and maximum
ZWL lending rates for individuals and corporates were higher during the same week. The ZWL
lending rates are shown in Table 2.

Table 2: Lending Rates (per annum)
Date
Minimum (%)
Maximum (%)
Minimum (%)
Maximum (%)

Individual Clients

Corporate Clients
21-July-23

28-Jul-23

04-Aug-23

11-Aug-23

18-Aug-23

Source: Reserve Bank of Zimbabwe, 2023

Foreign Currency (USD) Deposit Rates

During the week under review, minimum and maximum FCA deposit rates for all classes of
deposits remained largely unchanged. Maximum deposit rates for deposits of 1 month and 3
month tenor increased as banks took measures to attract long term deposits amid demand for
foreign currency by clients. Average foreign currency deposits rates are shown in Table 3.

Table 3: Average Foreign Currency Deposit Rates (per annum)

Date
Savings deposits (%)
1- Month deposit
rates (%)

3- Month deposit
rates (%)

6-Month deposit
rates (%)

12- Month deposit
rates (%)

Minimum
(%)
Maximum
(%)
Minimum
(%)
Maximum
(%)
Minimum
(%)
Maximum
(%)
Minimum
(%)
Maximum
(%)
Minimum
(%)
Maximum
(%)
28-July-23

04-Aug-23

11-Aug-23

18-Aug-23

Source: Reserve Bank of Zimbabwe, 2023

Foreign Currency (USD) Lending Rates


Minimum foreign currency lending rates (FCA) for individuals fell by 0.01 percentage points
while minimum foreign currency lending rates for corporate clients increased by 0.01 percentage
points during the week under review. Maximum lending rates for both individual and corporate
clients were higher during the week under review. The increase in FCA lending rates may
increase borrowing costs for the productive sectors.
Table 4: Lending Rates (per annum)
Date
Minimum (%)
Maximum (%)
Minimum (%)
Maximum (%)

Individual Clients

Corporate Clients
14-July-23

21-July-23

28-Jul-23

04-Aug-23

11-Aug-23

18-Aug-23

Source: Reserve Bank of Zimbabwe, 2023
3.
CLEARING AND SETTLEMENT ACTIVITY

During the week under analysis, aggregate transactions processed in value terms through
National Payment Systems (NPS) platforms was ZW$3.7 trillion, representing a decrease of
24.55% from ZW$4.9 trillion in the previous week. The Real Time Gross Settlement (RTGS)
system constituted 84.34% of the total value of transactions processed through the NPS. In value
terms, NPS transactions were distributed as shown in Figure1.
Figure 1: Composition of NPS Transactions in Value Terms

Source: Reserve Bank of Zimbabwe, 2023


RTGS
84.34%
POS
5.10%
ATM
3.67%
MOBILE
6.88%
RTGS
POS
ATM
MOBILE

The volume of transactions processed through the NPS declined by 10.27% to close at 9.78
million driven by decreases in Mobile, RTGS, POS and ATM transactions volumes. NPS
transaction volumes were distributed as follows: Mobile, 80.86%; POS, 16.74%; ATM, 1.15%;
and RTGS, 1.25%, as shown in Figure 2.

Figure 2: Composition of NPS Transactions in Volume Terms

Source: Reserve Bank of Zimbabwe, 2023

Table 5: National Payment Systems Activity
PAYMENT
STREAM
WEEK ENDING
11 August 2023
WEEK ENDING

18 August 2023
% CHANGE FROM
LAST WEEK
PROPORTION
%
Values in ZW$ Millions
RTGS

POS

ATM

MOBILE

TOTAL

Volumes
RTGS

POS

ATM

MOBILE

TOTAL

Source: Reserve Bank of Zimbabwe, 2023

4.
TOBACCO SALES
As at the 109th day of the tobacco selling season, a cumulative total of 295.64 million kilograms
of tobacco had been sold, compared to a cumulative total of 205.98 million kilograms sold during
the same period in 2022. The turnover realized from the sales amounted to US$895.45 million,
a 42.03% increase, compared to US$630.47 million realized during the same period in 2022.


RTGS, 1.25%
POS, 16.74%
ATM, 1.15%
MOBILE, 80.86%
RTGS
POS
ATM
MOBILE

Table 6: Weekly Cumulative Tobacco Sales: Day 109th (18th August 2023)

Variance (%)
Cumulative Quantity Sold (million
kgs)
205,979,249
295,635,420
43,53
Average Price (US$/kg)
3.06
3.03
-1.04
Cumulative value (US$ million)
630,471,612
895,451,649
42,03
Source: Tobacco Industry and Marketing Board (TIMB), 2023

The golden leaf continued to be sold at a lower average price of US$3.03/kg, during the week
under review, down from US$3.06/kg realized during the same period in 2022.

5.
INTERNATIONAL COMMODITY PRICE DEVELOPMENTS


During the week ending 18th August 2023, international commodity prices for gold, platinum,
copper, nickel, and crude oil retreated, whilst palladium price increased. Table 7 shows
developments in prices for selected commodities, during the week under review.

Table 7: Metals and Crude Oil Prices: Week ending 18th August 2023

Gold
Platinum
Palladium
Copper
Nickel
Crude Oil

US$/ounce
US$/ounce
US$/ounce
US$/tonne
US$/tonne
US$/barrel
Weekly Average
(7 - 11 Aug)

14-Aug

15-Aug

16-Aug

17-Aug

18-Aug

Weekly Average
(14 - 18 Aug)

Weekly Change

Source: BBC, KITCO and Bloomberg 2023

Gold

Gold prices decreased by 1.27% to US$1,901.20 per ounce from US$1,925.58 per ounce
recorded in the previous week. Prices receded after optimistic U.S. economic data reinforced
expectations that the Federal Reserve would continue raising interest rates.

Platinum
During the week under analysis, platinum prices declined by 1.26%, from a weekly average of
US$910.80 per ounce in the week ending 11 August 2023 to a weekly average of US$899.30 per
ounce. This was due to weak industrial demand and gloomy investment prospects as investors
rekindled their appetite for riskier assets.
Palladium
Palladium prices traded positively on account of picking demand from the electronics industry.
The prices increased by 0.06%, from a weekly average of US$1,244.40 per ounce in the previous
week to US$1,245.20 per ounce during the week under review.

Copper
Copper prices retreated during the week under review following disappointing economic data
from China, the world’s top consumer of industrial metals and fears of further U.S. interest rate
hikes. Prices fell by 2.22%, from an average of US$8,411.73 per tonne in the prior week to
US$8,224.74 per tonne, during the week under review.
Nickel
During the week under analysis, nickel prices slumped by 3.26% to close at US$20,074.60 per
tonne, from US$20,751.40 per tonne reported in the previous week. Prices retreated as the
market grew wary of further cooling of the Chinese economy, undercutting demand in the
construction sector.
Brent Crude Oil
Brent crude oil prices declined by 2.05%, from US$86.38 per barrel in the prior week to
US$84.61 per barrel during the week under review. Prices fell as hopes for an increase in Chinese
demand faded despite reduced supply from OPEC+ members.


Exchange Rate Developments

Interbank Market
The Zimbabwe dollar (ZW$) depreciated by 0.33% on the interbank market, from an average of
ZW$4,554.55 per US$1 in the previous week to ZW$4,569.46 per US$1 during the week under
review, as shown in Table 8.

Table 8: Selected Exchange Rates (ZW$ per unit of foreign currency)

USD
ZAR
GBP
BWP
EURO
Weekly Average (7- 11 August)

16-Aug

17-Aug

18-Aug

Weekly Average (14- 18 August)

Appr (-)/Depr (+) (%) of the ZWL

Source: Reserve Bank of Zimbabwe, 2023


6. EQUITY MARKETS

During the week ending 18th August 2023, the Zimbabwe Stock Exchange (ZSE) and the Victoria
Falls Stock Exchange (VFEX) traded in a positive trajectory. Concomitantly, the ZSE and VFEX
All Share indices gained 1.34% and 0.93% to close the week at 120 504.79 points and 71.26
points, respectively.

Zimbabwe Stock Exchange (ZSE) Developments

The Top 10 and Top 15 indices gained 2.16% and 1.47% to 56 507.49 points and 77 070.41
points, compared to previous week’s positions of 55 314.05 points and 77 070.41 points,
respectively. The resource index, however, remained unchanged at 94 942.74 points, during the
week under analysis. Figure 3 shows developments on the ZSE’s All Share, Top 10 and Mining
indices from 19th August 2022 to 18th August 2023.

Figure 3: ZSE All Share, Top 10 and Mining Indices
Source: Zimbabwe Stock Exchange, 2023


19-Aug-22
02-Sep-22
16-Sep-22
30-Sep-22
14-Oct-22
28-Oct-22
11-Nov-22
25-Nov-22
09-Dec-22
23-Dec-22
06-Jan-23
20-Jan-23
03-Feb-23
17-Feb-23
03-Mar-23
17-Mar-23
31-Mar-23
14-Apr-23
28-Apr-23
12-May-23
26-May-23
09-Jun-23
23-Jun-23
07-Jul-23
21-Jul-23
04-Aug-23
18-Aug-23
Mining Index
All Share and Top 10 Indices
All Share Index (ZSE)
Top 10 Index
Mining Index

The increase in the mainstream index was attributed to share price gains in Dairiboard Holdings
Limited (22.22%), Nampak Zimbabwe Limited (14.75%), Turnall Holdings Limited (11.67%),
Ok Zimbabwe Limited (10.83%) and Delta Corporation Limited (9.01%).

Partially offsetting the aforementioned increase were losses in the share prices of CBZ Holdings
Limited (15.00%), Masimba Holdings Limited (13.42%), Afdis Distillers Limited (11.11%),
Edgars Store Limited (7.65%) and Econet Wireless Zimbabwe Limited (7.05%). The resource
index, however, remained unchanged at 94 942.74 points, during the week under analysis.

Market Turnover
Due to the holiday shortened week, cumulative volume and value of shares traded decreased by
90.80% and 83.85% to 2.87 million shares and ZW$1 650.75 million, compared to 31.19 million
shares and ZW$10 219.66 million recorded in the prior week, respectively.

Figure 4 shows the trend in daily market turnover for the period 19th August 2022 to 18th August
2023.
Figure 4: Market Turnover
Source: Zimbabwe Stock Exchange, 2023


19-Aug-22
02-Sep-22
16-Sep-22
30-Sep-22
14-Oct-22
28-Oct-22
11-Nov-22
25-Nov-22
09-Dec-22
23-Dec-22
06-Jan-23
20-Jan-23
03-Feb-23
17-Feb-23
03-Mar-23
17-Mar-23
31-Mar-23
14-Apr-23
28-Apr-23
12-May-23
26-May-23
09-Jun-23
23-Jun-23
07-Jul-23
21-Jul-23
04-Aug-23
18-Aug-23
ZW$ (Million)
Notable Trades: 31.45 million
Ariston Holdings Limited
shares and 4.26 million Delta
Holdings Limited shares
exchanged hands at
ZW$15.02/share and
ZW$4077/share, respectively.
Negotiated deal: 61.16
million Lafarge Cement
Zimbabwe Limited
shares exchanged hands
at ZW$312.65/share

Market Capitalisation
Owing to improved trading activity on the ZSE during the week under review, the market gained
0.95%, or ZW$89.96 billion worth of capitalization to close at ZW$9 568.62 billion, compared
to ZW$9 478.66 billion registered in the previous week. Figure 5 shows the evolution of market
capitalization for the period 19th August 2022 to 18th August 2023.

Figure 5: Market Capitalization

Source: Zimbabwe Stock Exchange, 2023


Victoria Falls Stock Exchange (VFEX) Developments
The rise in the VFEX mainstream index was a result of share price increases in Axia Corporation
Limited (7.69%), First Capital Bank Limited (3.41%), Innscor Africa Limited (3.25%) and
Simbisa Brands Limited (2.68%). Partially offsetting the abovementioned increases were
declines in the share prices of National Foods Holdings (3.66%), Zimplow Holdings Limited
(0.25%) and Seed Co International VX (0.11%).

VFEX Market Turnover
The VFEX cumulative volume and value of shares traded declined by 63.31% and 74.14% to
0.64 million shares and US$0.12 million. This compares to 1.75 million shares and US$0.46
million, recorded in the previous week, respectively.


19-Aug-22
02-Sep-22
16-Sep-22
30-Sep-22
14-Oct-22
28-Oct-22
11-Nov-22
25-Nov-22
09-Dec-22
23-Dec-22
06-Jan-23
20-Jan-23
03-Feb-23
17-Feb-23
03-Mar-23
17-Mar-23
31-Mar-23
14-Apr-23
28-Apr-23
12-May-23
26-May-23
09-Jun-23
23-Jun-23
07-Jul-23
21-Jul-23
04-Aug-23
18-Aug-23
$ Billions

VFEX Market Capitalization
Reflecting the positive momentum on the VFEX during the week under analysis, the market
gained 0.92% worth of capitalization to close at US$1.22 billion, compared to US$1.21 billion
registered in the previous week. Figure 6 shows the trend in the VFEX All Share Index for the
period 19th August 2022 to 18th August 2023

Figure 6: VFEX All Share Index
Source: Victoria Falls Stock Exchange (VFEX), 2023

7. BANK POLICY RATE, EXCHANGE RATE AND INFLATION STABILITY

The monetary policy stance has remained tight since the last half of 2022 following the major
hike in the Reserve Bank of Zimbabwe’s policy interest rate to 200% per annum in July 2022.
Since then, the bank policy rate has been reviewed in line with prevailing macroeconomic
conditions, especially inflation and exchange rate developments. The first review on the policy
rate was in February 2023, when the policy rate was reduced to 150% per annum followed by a
further downward review to 140% per annum in March 2023. The re-emergence of inflation and
exchange rate pressures since mid-April led to the policy rate being raised back to 150% per
annum. The economy has witnessed sustained price and exchange rate stability under the current
tight monetary policy stance.

To ensure that the current tight monetary policy conditions do not hurt the productive sectors
and negate the performance of the productive sectors, the Bank has been maintaining a relatively

low interest rate profile on the Medium-Term Bank Accommodation interest rates, which is the
window through which the productive sectors, including the Micro Small to Medium Enterprises
access concessionary credit. The window, together with the foreign currency auction system has
managed to keep production and industry capacity utilization elevated even in an environment
of tight monetary conditions. The interest rate on the accommodation facility is currently at 75%
per annum.

The transmission from the Bank policy rate to the key lending rates by banks is an important
market-based mechanism to control speculative borrowing and excessive expansion of credit that
may exert pressure on the exchange rate and inflation in the economy. The policy rate plays a
pivotal role in influencing borrowing, saving and investment decisions by corporates and
individuals as well as influencing lending decisions by financial institutions which in turn
influences aggregate demand conditions in the economy. An increase in interest rates also
curtails speculative behavior and foreign currency demand and brings inflation under control. As
such, the Bank seeks to align the policy rate to current and expected inflation pressures.

The cross plot of interest rates and the parallel exchange rate premium below clearly shows the
strong relationship between the policy interest rate and the bank lending rates. The figure also
shows the strong relationship between the changes in the money market interest rates and the
parallel exchange rate premium and monthly inflation. The relationships are critical for effective
transmission of the Bank interest rate policy to the wider economy, which is channelled through
changes in credit and composition and structure of domestic expenditure.

Figure 7: The Policy Rate, Bank Lending Rates and the Parallel Exchange Rate Premium


Jan-22
Feb-22
Mar-22
Apr-22
May-22
Jun-22
Jul-22
Aug-22
Sep-22
Oct-22
Nov-22
Dec-22
Jan-23
Feb-23
Mar-23
Apr-23
May-23
Jun-23
Jul-23
Aug-23
Percent (%) RHS
Percent (%) LHS
Exhange Rate Premium (LHS)
Policy Rate (LHS)
Maximum lending rate for corporates (LHS)
Month-on-month inflation (RHS)

The increase in the Bank policy rate from 80% to 200% per annum in July 2022 resulted in the
banks increasing the retail minimum lending rates for corporate clients from 48% to 165% per
annum and the maximum rates from 80% to 220% per annum in the same month. The lending
rates to individual clients were also hiked significantly in the same month. Consequently, the
growth in broad money supply slowed down from about 15% per month in June 2022 to less
than 10% in July 2022 as the increase in the policy rate restrained growth in bank reserves. The
domestic monetary conditions have remained tight through to the second half of 2023. This has
kept speculative borrowing subdued and the economy has seen the policy pay-offs that have been
realized through falling parallel exchange rate premium and inflation since 2022.
The parallel exchange rate premium which had widened to more than 80% in June 2022 has been
on the decline due to the prevailing tight monetary conditions. The premium immediately fell
after the hike in the Bank policy rate to 200% per annum in July 2023, reaching about 20% by
September 2022 before regaining momentum to reach about 120% in April 2023 following the
transitory turbulences on the economy that came with some temporary shocks on the demand
and supply of foreign currency in the economy. The upward revision in the Bank policy rate to
150% per annum in April 2023, however, reversed the upward surge in the parallel exchange
rate premium, which has since fallen to within 20%. The current mix of policies, which includes
a more liberalized foreign currency market, foreign currency supply measures, increased fiscal
austerity, liquidity mopping, the introduction of the gold and gold backed tokens and the high
interest rates have seen the parallel and official exchange rates moving towards convergence with
the parallel exchange rate premium or gap falling to within the 20% benchmark.
The decline in the parallel exchange rate premium in the current tight monetary environment has
been mirrored in a concomitant decline in inflation. Annual inflation declined from a high of
106.3% in August 2022 when the Bank embarked on the current tight monetary policy stance to
the current rate of 77.2% as of August 2023. Similarly, monthly inflation declined from 18% to
a negative rate of 6.2% in August 2023.
The Bank policy has proved to be an effective instrument of monetary policy. Its combination
with the right mix of fiscal and other macro-policies has yielded sustained stability in the
economy. Going ahead, the Bank will continue to be guided by current and expected inflation
developments to align both the policy rate and the medium-term bank accommodation rate with
other key macroeconomic fundamentals and developments in the economy.
RESERVE BANK OF ZIMBABWE


APPENDIX 1: FOREIGN EXCHANGE AUCTION RESULTS FOR MAINFX1 AND WHOLESALEFX 2
Source: Reserve Bank of Zimbabwe, 2023

1 Main Foreign Currency Auction. The Auction is normally conducted every Tuesday every week.
2 Wholesale Foreign Currency Auction (Wholesale FX). The RBZ MPC resolutions dated 6 June 2023 resolved that with effect from 7 June 2023, the Bank shall sell foreign currency at the market-determined exchange
rate through banks to support and strengthen the foreign exchange interbank market, and banks shall in turn sell the foreign currency to their customers.


WHOLESALEFX
01-August-23 03- Aug-23 08-Aug-23 16-Aug-23
Total
Bids (US$ dollars)

Amount Allotted (US$ dollars)

Highest Rate

Lowest Bid
Rate

Lowest Bid Rate Allotted

Weighted Average Rate

Number of Bids Received

Number of Bids Rejected

APPENDIX 2: SUMMARY OF FOREIGN CURRENCY AUCTION ALLOTMENTS BY PURPOSE
Source: Reserve Bank of Zimbabwe, 2023

Purpose
MAINFX
25-July-23 01-Aug-23 08-Aug-23
16-Aug-23
Raw Materials

Machinery and Equipment

Consumables
(Incl. Spares, Tyres,
Packaging)

Pharmaceuticals and
Chemicals

Services (Loans, Dividends
and Disinvestments)

Retail and Distribution

Fuel, Electricity and Gas

Paper and Packaging

TOTAL
601,650.01
497,893.08
884,829.72
569,439.28