MONETARY POLICY STATEMENT
STAY THE COURSE


By
JOHN PANONETSA MANGUDYA
GOVERNOR

7 FEBRUARY 2022
R
E
S
E
R
V
E
B
A
N
K
O
F
Z
I
M
B
A
B
W

TABLE OF CONTENTS

Export Retention for Manufacturing, Horticulture and Cross-Border Transport

TABLE OF FIGURES

LIST OF TABLES

SECTION ONE
INTRODUCTION AND BACKGROUND

1.
This Monetary Policy Statement (MPS) is issued in terms of Section 46 of
the Reserve Bank Act (Chapter 22:15) which requires the Governor of the
Reserve Bank of Zimbabwe (the Bank) to issue a statement outlining the
monetary policy stance for the subsequent six months, the reasons for the
policies and an evaluation of the previous period monetary policy measures.
2.
Since the last monetary policy statement issued in August 2021, the Bank
has remained steadfast and resolute in its quest to foster domestic
macroeconomic and financial system stability. Notwithstanding the Covid19 induced effects on inflation and wider macroeconomic stability, year-onyear inflation went down from a peak of 837.5% in July 2020 to 60.7% in
December 2021.
3.
The conservative monetary targeting framework currently being pursued by
the Bank has seen quarterly growth in reserve money being successfully
contained within the desired targets throughout 2021. The quarterly growth
targets in reserve money were reduced from 20% to 10% in the last quarter
of 2021, signalling a tighter monetary policy stance in response to resurging
inflationary pressures and adverse exchange rate expectations. As such,
reserve money ended the year 2021 at ZW$25.9 billion, compared to a
maximum threshold of ZW$29 billion for the last quarter of 2021. As a result
of the tightening, annual growth in broad money (M3) also fell from a peak
of 507.9% in January 2021 to 131.8% by December 2021.
4.
The banking sector remained safe and sound with demonstrable capacity for
increased support to the recovery of the economy even in the face of
vulnerabilities induced by the Covid-19 pandemic. The banking sector asset
quality also remained satisfactory with the average non-performing loans

(NPLs) to total loans ratio of 0.94% as at 31 December 2021, against an
acceptable international benchmark of 5%.
5.
The resurgence of inflationary pressures at the end of 2021, which saw
annual inflation closing the year at 60.7%, mainly as a result of the parallel
exchange rates pass-through effect on domestic inflation that continues to
bedevil the economy, makes the exchange rate pass through an important
consideration for to this Monetary Policy Statement. Thus, whilst the auction
exchange rate depreciated from ZW$85 per US$1 for much of 2021 to close
the year at ZW$108 per US$1, the parallel market premiums which rose to
between 40% and 90% exerted significant inflationary pressures on the
economy.
6.
The pass-through effects of the exchange rate movements on inflation
required the Bank to take prompt measures to dampen the inflationary
pressures in order to sustain the downward trend in the month-on-month
inflation, witnessed in the last three months. The sustenance of the current
tight monetary policy is thus anticipated to usher further stability on the
exchange rate and inflation in 2022.
7.
Evidence from high frequency data on industry performance points to an
improved outlook in 2022. Economic growth is projected at 5.5% in 2022
while annual inflation is expected to decline to between 25% and 35% by
end of 2022, from 60.7% in December 2021. The ongoing progress in
vaccinations against Covid-19 and a return to normal business will revive
and boost economic activity and set the economy on a sustained growth
trajectory in 2022 and beyond.
8.
The Bank commends the Monetary Policy Committee (MPC) for being
proactive in providing the necessary guidance on monetary policy. The Bank
also commends business for supporting the restoration of macroeconomic

stability, observance of the monetary policy measures and heeding of the
Bank’s call to refrain from manipulating or driving the exchange rate
downwards as a means of discouraging consumers to transact in local
currency, by preferring foreign currency over local currency, Equally, the
Bank commends the Government for complementing the monetary policy
measures through appropriate fiscal consolidation and for widening the use
of the local currency which is necessary to anchor inflation. The
complementarity between fiscal and monetary policy is key in efforts to
control inflation, as well as improving macroeconomic stability in the
economy.
9.
While the domestic economic outlook is favourable, the weaker than initially
anticipated global economic outlook, due to the new Omicron Covid-19
variants, poses threats to the pace of domestic economic recovery
particularly in the tourism industry and on some commodity prices. In
addition, rising energy prices and supply disruptions which have resulted in
higher and more broad-based inflation in the United States and many
emerging markets and developing economies present significant passthrough effects to the domestic inflation. Against this backdrop, the
measures contained in this Statement will ensure that the Bank stays the
course on tightening monetary policy to curb inflation, while ensuring that
the ongoing domestic economic recovery is supported, notwithstanding the
pandemic.
10. The rest of the Statement is organised as follows: Section two assesses the
effectiveness of previous monetary policy measures; Section three highlights
the recent economic developments; Section four provides financial sector
developments; Section five provides the Balance of Payments
developments; Section six provides the new monetary policy measures for

the next 6 months; Section seven provides the economic and inflation
outlook; and lastly Section eight concludes the Statement.

SECTION TWO
ASSESSMENT OF PREVIOUS MONETARY POLICY MEASURES

11. The monetary policy measures implemented by the Bank have helped to
restore macroeconomic stability in the economy. Annual inflation declined
from 348% in December 2020 to 60.7% in December 2021. The exchange
rate remained stable at about ZW$85 per US$1 for the greater part of 2021,
notwithstanding the temporary volatility experienced in the last quarter of
2021. The parallel market exchange rate premium also widened in the last
quarter of the year to between 40% and 90% on account of the high demand
for foreign currency which was driven by an increase in aggregate demand
emanating mainly from the good agricultural outrun and general increase in
economic activity and exports.
12. The monetary targeting framework adopted by the Bank has gone a long way
in anchoring exchange rate and inflation expectations. The growth in reserve
money supply has remained constrained and within the monetary targeting
framework growth rates and in line with domestic economic fundamentals
and the need to support sustainable economic growth.
13. The measures that were being pursued by the Bank during the last six months
of 2021 included the following:-

Interest Rate Policy
14. The Bank maintained its policy rate at 60% during the last quarter of 2021
to contain speculative demand within the economy.

15. In order to encourage domestic production, the Bank maintained the
Medium-Term Bank Accommodation Facility which was introduced in
November 2019. The interest rate on the facility was increased from 30% to
40% in October 2021. Cumulative disbursements under the facility as at 31
December 2021 stood at ZW$7.5 billion while the outstanding amount was
ZW$3.9 billion. The Bank’s Medium-Term Accommodation Facility has
also helped to enhance productivity and ensured availability of goods in the
economy.

Statutory Reserve Requirements
16. The Bank further tightened its monetary policy stance by adjusting statutory
reserve requirements of banks in October 2021. The statutory reserve ratio for
demand and call deposits was increased from 5% to 10%, while the ratio for
time deposits was maintained at 2.5%. Consequently, statutory reserve
balances rose from ZW$9.58 billion as at 28 October 2021 to ZW$20.0 billion
as at 31 December 2021.

Foreign Exchange Auction System
17. The foreign exchange auction system, which is now in its second year,
continues to play a critical role in bringing transparency, inclusivity and
stability in the trading of foreign currency in the economy. As at 31
December 2021 the Bank had successfully conducted 77 Main and 71 SMEs
Auctions from its inception on 23 June 2020. In 2021, US$1.97 billion was
allotted, representing 97% of total bids submitted to the auction. This
amount represents around 30% of total foreign payments processed by banks
in 2021.

18. As a reflection of the importance of the SMEs sector, the share of allotments
of the SMEs Auction to total allotments grew from 8% in first quarter of
2021 to 19% in the fourth quarter of 2021 as shown in Figure 1.

Figure 1: Foreign Exchange Auctions Allotments in 2020-2021

Source: RBZ

19. There was a marked increase in the number of participants on the auction
system as applicants rose from about 500 at the beginning of 2021 to reach
a peak of just over 2,000 by year-end. The auction system has provided
essential liquidity to key productive sectors of the economy, leading to
enhanced capacity utilisation and significant import substitution. Most of the
auction allotments went towards imports of raw materials, machinery and
equipment as well as other consumables for industry.


Jun-20
Jul-20
Aug-20
Sep-20
Oct-20
Nov-20
Dec-20
Jan-21
Feb-21
Mar-21
Apr-21
May-21
Jun-21
Jul-21
Aug-21
Sep-21
Oct-21
Nov-21
Dec-21
US$ million
Main FX Auction
SME Fx Auction

Figure 2: Foreign Currency Allotments to Productive Sectors

Source: RBZ


Foreign Exchange Receipts
20. The country recorded its highest ever foreign currency receipts of US$9.7
billion in 2021, an increase of 53.5% from 2020, as shown in Table 1. This
performance, which dwarfs the previous record of US$7.6 billion recorded
in 2013, is attributable to increased international commodity prices,
increased international remittances and the gold incentives put in place by
the Government.


Raw Materials
43%
Machinery and
Equipment
19%
Retail &
Distribution
8%
Services
7%
Consumables
10%
Fuel, Electricity
& Gas
6%
Medicals &
Chemicals
7%

Table 1: Total Foreign Currency Receipts (US$ million)
Type of Receipt
Year 2021
(US$ Million)
Year 2020 (US$
Million)
% Change
Export Proceeds

6,194.70
3,718.80
66.6%
International
Remittances
Diaspora
Remittances
1,430.14
1,002.10
42.7%
NGOs
975.16
647.75
50.5%
Loan Proceeds

876.06
845.21
3.6%
Income receipts

118.93
56.85
109.2%
Foreign Investment

91.14
40.06
127.5%
TOTAL

9,686.13
6,310.76
53.5%
Source: RBZ

Foreign Payments Performance
21. For the year 2021, banks processed foreign payments amounting to US$6.99
billion. This represents a 45.2% increase in foreign payments from US$4.82
billion recorded for the same period in 2020. The upward trajectory in
foreign payments was largely on account of increased foreign currency
supply from the auction system and exports, consistent with the increased
capacity utilisation in industry. Table 2 shows foreign payments, by
category, for the same period in 2021 and 2020.

Table 2: Foreign Payments from January to December 2021
Category

% Variance
Contribution 2021
Contribution

Merchandise Imports (excl. energy)

- Raw materials, pharmaceuticals & food

- Capital Goods

- Intermediate Goods

Energy (Fuel & Electricity)

- Fuel

- Electricity

Service Payments

- Technical, Professional & consult

- Software

- Other (tourism, education, freight etc)

Income Payments (Profits, Dividends)

- Dividends

- Interest Payments

- Other (Salaries, Expats, Rental)

Capital Remittances (outward)

- External Loan Repayments

- Disinvestments

- Foreign Investment

Other Payments (International
Cards and Refunds)

Total

Source: RBZ

22. Consequently, significant increases in foreign currency receipts relative to
foreign payments resulted in significant increases in foreign currency (FCA)
deposits in the banking sector to an average of US$1.7 billion in 2021.

Interbank Foreign Exchange Market
23. The interbank market also continued to be a key source of foreign currency
outside the auction system. To this end, foreign exchange traded outside the

auction, excluding sales to bureaux de change, rose by 72% to US$1.86
billion in 2021.

The Weekly US$50 Bureau de Change Facility
24. The Bank introduced this facility in the second half of 2021, on 30 August
2021, to cater for the general foreign currency requirements for the public at
the official exchange rate. A total amount ofUS$23.1 million was disbursed
to 461 908 individuals as at 31 December 2021. The Bank was of the
considered view that this facility would meet the small foreign currency
requirements of the public for, among other things, medical expenses and fuel
at the official exchange rate and thus improving the supply of foreign exchange
in the market.

25. Whilst the facility has gone a long way in assisting the needy, the facility has
been highjacked by those that seek to make arbitrage profits. This behaviour
calls for the Bank to review the facility.


Foreign Exchange Mobilisation
26. The Bank continued to negotiate for offshore lines of credit to support the
foreign exchange auction system, refinance existing obligations as well as
meeting the country’s balance of payments requirements in 2021. In this
regard, the Bank arranged a US$150 million Letter of Credit (LC) facility
from the African Export-Import Bank (Afreximbank) which helped in
reducing pressure on the auction. The Bank is also pleased by the role the

banks played in availing to their clients LCs and foreign currency advances
from their own positions to the tune of US$375 million.
27. The ultimate solution to the country’s foreign currency situation is not
borrowing but increased production, improved productivity and efficient
mobilisation of domestic financial resources.

SECTION THREE
RECENT ECONOMIC AND INFLATION DEVELOPMENTS

28. The domestic economic recovery is expected to continue albeit at a slower
rate of 5.5% from 7.8% recorded in 2021. This development is consistent
with global trends where the International Monetary Fund projects the global
economy to grow by 4.4% in 2022 compared to 5.9% in 2021, as rising
Covid-19 cases, supply chain disruptions and higher inflation hamper
economic recovery.
29. Many economies around the globe are experiencing rising inflationary
pressures due to continuing disruptions in global supply chains amid the
Covid-19 pandemic, turmoil in the labour markets, rising oil prices and
strong consumer demand following the reopening of some economies,
among other things.
30. The United States of America Consumer Price Index, for example, increased
to 7% in December 2021 from low digit levels of close to 1%. Similarly, the
Eurozone recorded its highest inflation rate of 4.9% since the formation of
the monetary union, with German inflation at a 29-year high of 5.2%. The
rise in US inflation has been largely driven by increased money supply
growth in the economy caused by the US government stimulus expenditure
and support against Covid-19. For Sub-Saharan Africa the surge in inflation
was mainly driven by food inflation, which accounts for about 40% of the
region’s consumption basket.
31. The IMF perceives that inflation risks will remain skewed to the upside and
could be sustained further if pandemic-induced supply-demand mismatches
continue, leading to more sustained price pressures and rising inflation
expectations. As a result, the IMF has called on central banks to respond
quickly if the risks of rising inflation expectations become more apparent.

32. Domestically, the business community, notably, the Chamber of Mines of
Zimbabwe and Confederation of Zimbabwe Industries (CZI) are bullish
about the economic prospects in 2022. For instance, the state of the Mining
Industry Report suggests that the mining business confidence index recorded
an increase from 9.8% in 2021 to 17% in 2022. The report also noted that
about 42% of the respondents in the mining sector expect to ramp up
production by over 40% in 2022.
33. The positive sentiments on the economy by the business community suggest
that the expected robust economic growth envisaged in 2022 is attainable.
Economic growth would be driven by construction, mining as international
commodity prices increased as well as accommodation and food services in
line with easing of Covid-19 restrictions.

Gold Deliveries
34. In the mining sector, gold deliveries to Fidelity Gold Refiners (FGR) jumped
from 19 052.65 kgs delivered in 2020 to 29 629.61 kgs delivered in 2021.
This represents an increase of 55.51% or 10 576.96 kgs. The increase is
mainly attributable to the 5% gold incentive given to those delivering at least
20kg to FGR and an incremental of 2 percentage points for each ton
delivered to FGR.
35. During the same period, primary gold producers delivered a total of 11
159.00 kgs, compared to 9 738.75 kgs delivered over the same period in
2020. This shows a 14.58% or 1 420.25 kgs year on year growth in terms of
primary producer deliveries. Deliveries from small-scale gold producers also
increased from 9 313.89 kgs during the period January to December 2021
compared to 18 470.61 kgs during the same period in 2020. This represents
a year-on-year growth of 98.31% or 9 156.72 kgs.

Figure 3: Comparison of Gold Deliveries to FDR in 2021 and 2020

Source: RBZ

Sectoral Performance of Gold Deliveries to FGR
36. For the year 2021 small scale producers contributed 62% of the total gold
deliveries to FGR compared to 49% in 2020, whereas primary producers
contributed 38% in 2021 which was less than the 51% which was achieved
in 2020, as highlighted in Figure 4.
Figure 4: Sectorial Performance for Gold Producers
Source: RBZ,2021


January
February
March
April
May
June
July
August
September
October
November
December

Primary
Producers,
51%
Small Scale
Producers,
49%

Primary
Producers, 38%
Small Scale
Producers,
62%

Manufacturing Sector Performance
37. The manufacturing sector performance is estimated to have increased in
2021 following volume recoveries across most subsectors that include
foodstuffs, chemical and petroleum products, drinks & beverages, tobacco
and non-metallic mineral products, supported by the stable economic
environment, the auction system that provided the much needed forex,
declining inflation as well as localisation of value chains. As a result, locally
produced goods now constitute above 80% of retail sales in the country.

Inflation Developments
38. The country has made significant progress in containing inflation since July
2020. As a result, annual inflation declined from a peak of 837.5% in July
2020 to 50.3% in August 2021. The decline in inflation resulted from the
implementation of appropriate disinflationary monetary policies and from
fiscal consolidation. The resurgence of inflationary pressures at the end of
2021, which saw annual inflation closing the year at 60.7%, is a result of the
parallel exchange rates pass-through effects in inflation.

Figure 5: Annual Inflation

Source: Zimstat 2021

39. Decline in both annual food and non-food inflation contributed to the fall in
headline inflation in 2021. Annual food inflation decreased from 369.43%
in January 2021 to end 2021 at 64.91%. Likewise, annual non-food inflation
decelerated from 357.69% in January 2021 to 57.74% in December 2021. In
addition to the tight monetary and fiscal policies, the auction system,
improved global economic activity, partly due to the relatively relaxed
Covid-19 lock-down measures and the global vaccination, helped to
resuscitate supply chains, which resulted in improved economic activity in
the domestic economy.

40. Whilst annual inflation responded positively to policy measures, the nascent
instability in the exchange rate, which saw the widening of foreign exchange
premiums in the second half of 2021, pushed up monthly inflation above the
targeted 2%. Both monthly food and non-food inflation, which had been
falling in the first half of the year, assumed an upward trend in line with
forex premiums in the second half of 2021.

Feb-20
Mar-20
Apr-20
May-20
Jun-20
Jul-20
Aug-20
Sep-20
Oct-20
Nov-20
Dec-20
Jan-21
Feb-21
Mar-21
Apr-21
May-21
Jun-21
Jul-21
Aug-21
Sep-21
Oct-21
Nov-21
Dec-21
Food Inflation
Non Food Inflation
All Items

Monetary Developments
41. The Bank continued to implement a conservative monetary targeting
framework to contain money supply growth and avert attendant pressures on
exchange rate and inflation. In this regard, quarter on quarter reserve money
growth target for 2021 was progressively reduced from 22.5% during the
first two quarters of 2021 to 20% in the third quarter, and further down to
10% in the fourth quarter of the year. The downward revision was
necessitated by the need to further tighten monetary policy in response to
resurgence of inflationary and exchange rate pressures in the economy.

42. The successive revisions in quarter-on-quarter growth targets saw reserve
money being reduced to ZW$25.49 billion as at the end of December 2021,
well within the fourth quarter target of ZW$28.9 billion. The quarter-onquarter reserve money growth rate fell by 1.14%, against a target of 10%.
This was despite the once-off increase in statutory reserves following the
upward revision of the statutory reserve requirement ratio for demand/call
deposits from 5% to 10%. Figure 6 shows reserve money developments
throughout the year 2021.

Figure 6: Reserve Money Developments (ZW$ Billions)

Source: RBZ

43. The year-end reserve money stock of ZW$25.49 billion translated to a year
on year growth of 38.26%, which was a decline of 43.44 percentage points
from 81.70% recorded in December 2020. Despite the relatively high money
multiplier in the economy, of about 10, the decline in the rate of annual
growth in reserve money saw broad money (M3) annual growth rate also
falling from 508% in January 2021 to 132% by December 2021.

Money Market Liquidity
44. In view of the set targets, a tight liquidity management framework was
adopted which resulted in average monthly banks’ balances at the Bank
declining from ZW$12.6 billion in December 2020 to ZW$3.6 billion in
December 2021.

45. The desired liquidity levels in the market were largely achieved through the
issuance of Non-Negotiable Certificates of Deposit (NNCDs) introduced in
June 2021. In this regard, the Bank discontinued the issuance of the 7%

Dec-20
Jan-21
Feb-21
Mar-21
Apr-21
May-21
Jun-21
Jul-21
Aug-21
Sep-21
Oct-21
Nov-21
Dec-21
Reserve Money Actual Outturn
Q1 Target
Q2 Target
Q3 Target
Q4 Target

Savings Bonds and OMO bills. The outstanding stock of NNCDs as at 31
December 2021 was ZW$37.6 billion. The trend in monthly average
balances for 2020 and 2021 are depicted in Figure 7.

Figure 7: Monthly Average Balances (ZW$ Billion)

Source: RBZ

46. Money market interbank trading remained low as most banks had surpluses
on their positions although the liquidity levels varied from one institution to
the other with a few institutions accounting for the bulk of the funds.
47. To manage liquidity frugally, the Bank and the Ministry of Finance and
Economic Development set-up a Liquidity Management Committee
comprising staff from both institutions. The Committee meets monthly to
deliberate on liquidity issues guided by the policies announced by the MPC.
48. During 2022, market liquidity will largely be influenced by developments
on net Government transactions including decisions on funding for the
purchase of agricultural produce as well as foreign exchange transactions.

Jan
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec

49. Broad money was made-up of local currency transferrable deposits, 46.54%;
foreign currency deposits, 44.33%; time deposits, 7.87%; negotiable
certificates of deposits, 0.78%; and currency in circulation, 0.49%.
50. Local currency deposits in broad money registered an annual growth of
161.21% in 2021, while currency in circulation increased by 93.86%.
Foreign currency deposits grew year on year by 103.13%, from ZW$103.73
billion in December 2020 to ZW$210.70 billion in December 2021, largely
due to an increase in the value of FCAs from an equivalent of US$1.27
billion in December 2020 to US$1.94 billion in December 2021. Figure 8
shows monetary developments between January 2020 and December 2021.

Figure 8: Monetary Developments

Source: RBZ


Stock Market Developments
51. The larger part of the year 2021 was characterised by profit taking and
portfolio re-balancing, largely in some selected counters with strong balance

Jan-20
Feb-20
Mar-20
Apr-20
May-20
Jun-20
Jul-20
Aug-20
Sep-20
Oct-20
Nov-20
Dec-20
Jan-21
Feb-21
Mar-21
Apr-21
May-21
Jun-21
Jul-21
Aug-21
Sep-21
Oct-21
Nov-21
Dec-21
Annual Growth (%)
ZW$ Billion
Local Currency Transferable Deposits
Foreign Currency Accounts
Currency in Circulation
NCDs
Time deposits
Annual Growth

sheets. The bullish sentiments exhibited on the Zimbabwe Stock Exchange
(ZSE) in 2021, resulted in a 314.37% increase in market capitalisation to end
the year at ZW$1 317.21 billion, compared to ZW$317.88 billion recorded
in December 2020.
52. In view of the above developments, during the same reporting period, the
All Share, Top 10, Small Cap and mining indices registered gains of
310.51%, 307.51%, 3 280.46% and 89.05%, respectively, to close at 10
822.36 points, 6 811.43 points, 402 753.21 points and 7 815.37 points,
respectively.

53. Figure 9 shows the developments of the ZSE All Share, Top 10 and Mining
Indices for the period December 2020 to December 2021.

Figure 9: ZSE Developments

Source: Zimbabwe Stock Exchange 2021


31-Dec-20
31-Jan-21
28-Feb-21
31-Mar-21
30-Apr-21
31-May-21
30-Jun-21
31-Jul-21
31-Aug-21
30-Sep-21
31-Oct-21
30-Nov-21
31-Dec-21
All Share Index
Top 10 Index
Mining Index

Market Turnover
54. As a consequence of improved trading, coupled with a significant number of
block trades registered on the local bourse during year under review, the
cumulative volume and value of shares traded increased by 109.64% and
276.50% to 7.84 billion shares and ZW$65.24 billion, compared to 3.74
billion shares and ZW$17.33 billion recorded in the previous year,
respectively.


Figure 10: ZSE Market Turnover
Source: Zimbabwe Stock Exchange, 2021

55. Foreign investors’ participation improved over the period under review,
reflected by cumulative net inflows of ZW$9.74 billion realized in 2021,
compared to net inflows of ZW$5.01 billion registered in the previous year.


Millions
Block Trade: Meikles Ltd (122.90
million shares, worth ZW$11.55
Block Trade: RTG Ltd (526.03 million
shares, worth ZW$2.9 billion
Block trades: ZB Holdings Ltd (66.53
million shares) and CBZ Holdings Ltd
(14.35 million shares)

SECTION FOUR
CONDITION AND PERFORMANCE OF THE BANKING SECTOR

56. The banking sector remained safe and sound with demonstrable capacity for
increased support to the recovery of the economy. As at 31 December 2021,
operating institutions in the banking sector comprised 13 commercial banks,
five (5) building societies, and one (1) savings bank. In addition, there were
168 credit-only microfinance institutions, eight (8) licensed deposit-taking
microfinance institutions and three (3) development financial institutions
under the purview of the Bank.
57. AFC Land & Development Bank of Zimbabwe Limited was granted
authority to commence operations on 18 October 2021.
Financial Soundness Indicators
58. The banking institutions remain resilient and well capitalized as reflected by
the financial soundness indicators depicted in Table 3.

Table 3: Financial Soundness Indicators
Key Indicators
Benchmark Dec - 20
Jun - 21
Sep -21
Dec - 21
Total Assets (ZW$ billion)

Total Loans & Advances (ZW$
billion)

Net Capital Base(ZW$ billion)

Core Capital(ZW$ billion)


Total Deposits(ZW$ billion)

Net Profit(ZW$ billion)

Return on Assets

Return on Equity

Capital Adequacy Ratio (%)


Tier 1 Ratio (%)


Loans to Deposits Ratio (%)


NPLs Ratio (%)


Liquidity Ratio (%)


Source: RBZ

Banking Sector Capitalization
59. The banking sector remained adequately capitalized, with the banking sector
average capital adequacy and tier one ratios of 32.86% and 26.54%,
respectively, above the regulatory minima of 12% and 8%, respectively. The
aggregate core capital increased by 59.11% from ZW$63.39 billion as at 30
September 2021 to ZW$100.83 billion as at 31 December 2021.

Compliance with the New Minimum Capital Requirements
60. In January 2020, the Bank increased minimum capital requirements for the
various classes of banking institutions as part of measures to promote the
resilience of the financial sector. Further, cognizant of the prevailing
challenging environment exacerbated by the negative impact of the Covid-

19 pandemic, the Bank extended the deadline for compliance with the
requirement for meeting the minimum capital levels from 31 December 2020
to 31 December 2021.
61. As at 31 December 2021, out of the 18 operating banking institutions
(excluding POSB with no statutory minimum capital requirement), 13
banking institutions complied with the new minimum capital requirements,
for their chosen capital tier segment as indicated in Table 4 below:

Table 4: Capitalisation of Banking Institutions
Institution
Declared Core Capital
as at 31 Dec 2021(ZW$)
Declared Core Capital
US$ Equivalent*
(US$1: 108.66600)

Status of Compliance**
AFC Commercial
Bank
1,627,598,960.77
14,977,996.44
Non-Compliant. Granted extension
to 31 December 2022 to complete
the recapitalisation process
BancABC
3,857,847,252.17
35,501,879.63
Compliant
CBZ Bank
14,033,487,153.68
129,143,312.11
Compliant
Ecobank
7,209,157,298.00
66,342,345.33
Compliant
FBC Bank
4,774,327,639.44
43,935,799.97
Compliant
First Capital Bank
8,449,194,109.14
77,753,797.04
Compliant
Metbank
14,492,258,483.83
133,365,160.07
Compliant
Nedbank Zimbabwe


2,538,164,207.13
23,357,482.63
Non-Compliant. Extension was
granted to 30 June 2022 to allow due
processes for a rights issue
NMB Bank
4,250,870,083.85
39,118,676.35
Compliant
Stanbic Bank
11,217,776,947.04
103,231,709.52
Compliant
Standard Chartered
Bank
3,380,772,132.66
31,111,590.86
Compliant
Steward Bank
3,461,396,304.28
31,853,535.64
Compliant
ZB Bank
5,743,968,503.73
52,858,930.15
Compliant
BUILDING
SOCIETIES


CABS Building
Society
9,549,660,011.44
87,880,846.00
Compliant

CBZ Building Society
(4,537,715,673.28)
(41,758,375.88)
Non-Compliant. Amalgamation of
CBZ Bank and CBZ Building Society
was approved. Processes to complete
the amalgamation are underway.
FBC Building Society
2,654,925-,702.67
24,431,981.51
Compliant
National Building
Society
406,339,153.81
3,739,340.31
Non-Compliant. Granted extension
to 31 March 2022 to complete the
recapitalization process
ZB Building Society
1,105,212,656.45
10,170,731.01
Non-Compliant. The holding
company, ZBFH, is mulling the
merger of ZB Bank & ZB Building
Society.
SAVINGS BANK


POSB
2,074,053,503.64
19,086,499.03
No prescribed minimum capital requirement
* The required minimum capital as at 31 December 2021 was ZW$ equivalent to US$30 million
for Tier 1 banking institutions and US$20 million for building societies

62. Banking institutions bolstered their capital positions through organic growth
including recapitalisation of revaluations gains on investment properties as
well as capital injection by shareholders.
63. As indicated above, AFC Commercial Bank, Nedbank and NBS were
granted extensions ranging from 3 to 12 months to allow consummation of
capital raising initiatives which are currently underway. In addition, merger
proposals will also address the minimum capital requirements for some
building societies. The Bank is confident that the remaining institutions will
meet the minimum capital requirements by 31 December 2022.
64. The above declared capital positions as at 31 December 2021 are being
subjected to external audit reviews as part of the annual financial audits of
banking institutions. The Bank will also conduct a capital verification
exercise during the year to ascertain the declared capital positions.
Banking Sector Loans and Advances
65. Total banking sector loans and advances increased by 61% from ZW$142.79
billion as at 30 June 2021 to ZW$229.94 billion as at 31 December 2021,
largely attributed to the translation of foreign currency denominated loans.
As at 31 December 2021, foreign currency denominated loans constituted
36.87% of total banking sector loans, an increase from 30.16% reported as
at 30 June 2021.
66. During the period under review, financial intermediation improved from
45.84% recorded in June 2021 to 48.27% as at 31 December 2021. The
banking sector continued to support the productive sectors of the economy
as evidenced by loans to the productive sector constituting 76.29% of total
loans as at 31 December 2021, as shown in Figure 11.

Figure 11: Sectoral Distribution of Loans as at 31 December 2021

Source: RBZ

67. The demand for loans is expected to continue improving in line with the
incremental recovery of economic activity from the Covid-19 pandemic.

Asset Quality
68. The banking sector asset quality remains satisfactory with the average nonperforming loans (NPLs) to total loans ratio of 0.94% as at 31 December
2021, against the generally acceptable international threshold of 5%. Figure
12 shows the trend in the level of non-performing loans to total loans ratio
(NPLs ratio) from December 2015 to December 2021.
Consumptive
20.12%
Other
3.05%
Agricultural
28.56%
Manufacturing
10.83%
Commercial
6.41%
Mining
5.95%
Distribution
12.38%
Construction
0.61%
Transport
1.86%
Communication
0.22%
Financial
5.13%
Mortgage
4.88%
Productive
76.29%

Figure 12: Trend in Non- Performing Loans

Source: RBZ

69. The impact of the disruptive effects of Covid-19 on asset quality turned out
to be less severe than initially envisaged. Banking institutions continued to
enhance and adopt sound credit risk management systems and internal
controls.
Banking Sector Profitability
70. Profitability for the banking sector has overally improved. For the year
ended 31 December 2021, the banking sector reported unaudited aggregate
profit of $59.29 billion, an increase of 69.63% from a profit of $34.95 billion
reported for the corresponding period in 2020.
71. During the year under review, interest income from loans and advances
contributed 34.99%, compared to 17.82% in December 2020, of the total
income, an indication of a shift towards the traditional sources of revenue
such as income from financial intermediation activities, which is considered
stable and sustainable. Figure 13 shows banking sector income mix as at 31
December 2021.

NPL Ratio
Benchmark

Figure 13: Banking Sector Income Mix as at 31 December 2021

Source: RBZ

72. Non-interest income was driven by fees and commissions due to increased
transactional volumes on digital platforms in the wake of Covid-19, as well
as initiatives by banking institutions to promote the use of plastic money.
Translation gains on foreign currency denominated assets, as well as,
revaluation gains from investment properties also contributed to the growth
in other non-interest income.
Banking Sector Deposits and Liquidity
73. The average prudential liquidity ratio was 64.37% as at 31 December 2021,
against the minimum regulatory requirement of 30%, largely reflecting high
stock of liquid assets in the sector. The trend in the liquidity ratio from 31
December 2018 to 31 December 2021 is shown in Figure 14.

Interest Income
from Loans
Advances and
Leases
34.99%
Interest Income on
Balances with
Banking
Institutions
0.67%
Interest Income On
Investments and
Securities
4.12%
Foreign Exchange
4.46%
Fees and
Commission
31.80%
Other Non Interest
Income
23.97%

Figure 14: Prudential Liquidity Ratio Trend

Source: RBZ

74. Total deposits amounted to ZW$476.35 billion as at 31 December 2021,
which represented a 29.79% increase from ZW$367.02 billion reported as at
30 September 2021.

Deposit Rates
75. As part of measures to promote savings, in October 2021 the interest rates
for ZW$ savings and time deposits were increased from 5% and 10% per
annum to 7.5% and 20% per annum, respectively. All banking institutions
were required to adjust the minimum deposit rates for savings and time
deposits with effect from 28 October 2021.
76. Banking institutions are paying interest rates for savings and fixed deposits
for both local accounts and foreign currency accounts in compliance with
Statutory Instrument 65A of 2020. The Bank will continue to monitor
banking institutions’ terms and conditions of business activities to ensure
adherence to fair business practices.

Dec-18
Jun-19
Dec-19
Jun-20
Dec-20
Jun-21
Dec-21
industry average
minimum requirement

Protection of Foreign Currency Denominated Accounts (FCAs)
77. The Deposit Protection Corporation (DPC) implemented an explicit deposit
protection scheme for the Foreign Currency Denominated Accounts (FCAs)
with effect from 31 December 2021. This policy followed extensive
consultations with stakeholders including the Bankers Association of
Zimbabwe, the Bank and the Ministry of Finance and Economic
Development.
78. The FCA maximum cover level is US$1,000.00 (one thousand United States
dollars) per deposit class per each banking institution and US$500.00 (five
hundred United States dollars) per deposit class per deposit-taking
microfinance institution with effect from 1 January 2022.

Sustainability
79. Globally, sustainable banking practices are becoming the future in banking.
The public increasingly expects financial institutions to demonstrate a sense
of purpose that extends beyond merely profit.
80. The Bank is cognisant of the critical role that financial institutions play in
supporting sustainable and resilient growth by integrating environmentally
and socially responsible business decisions into their corporate strategies.
81. In this regard, the Bank continues to work closely with a number of financial
institutions in the implementation of the Sustainability Standards &
Certification Initiative (SSCI) being driven by the European Organization
for Sustainable Development (EOSD).
82. As at 31 December 2021, nine (9) banking institutions were participating
under the central bank led Sustainability Standards and Certification
Initiative, while three (3) microfinance institutions were accepted into SSCI.

83. The participating institutions have made commendable progress in
implementing the key pillars of SSCI. Notably, they have refined their
mission/purpose statements and high impact goals to ensure they are aligned
to the country’s developmental objectives and goals.

Credit Registry System
84. The online Credit Registry System continues to complement and facilitate
provision of digital financial services, such as automated lending, and
effective management of credit risks by the banking sector. The Credit
Registry received a total of 980,187 enquiries in 2021, up from 275,829 in
2020 reflecting increased usage as the credit registry system matures. The
trend in inquiries from 2017 to 2021 is shown in Figure 15.


Figure 15: Trend of Inquiries for 2017-2021


Source: RBZ


85. As at 31 December 2021, the Credit Registry had 558 272 active loan
contracts, with individuals’ records accounting for 98.29% of the records in


NUMBER OF INQUIRIES

the Credit Registry. In terms of gender distribution, male and female
borrowers constituted 68.36% and 31.64% of loan contracts in the Credit
Registry, respectively.
86. Meanwhile, in the Credit Registry database 5.81% of loans granted to female
borrowers were delinquent contracts which were 90 days past due within 12
months from the date of issuance, compared to male borrowers who had
6.16% of their loans in arrears, as shown in Figure 16.

Figure 16: Percentage of Delinquent Loan Contracts by Gender

Source: RBZ

Collateral Registry
87. Significant progress has been made towards the operationalisation of the
Collateral Registry. Following some delays occasioned by the Covid-19
pandemic, the Bank successfully conducted the first User Acceptance
Testing of the Collateral Registry in December 2021. The second and final
testing session is now scheduled for January and February 2022 and shall
involve banking institutions and microfinance institutions.

Male
Female

88. The Bank is targeting to go live soon after the second User Acceptance
Testing when the vendor has considered stakeholder input on system
functionalities during the first quarter of 2022.
Performance of the Microfinance Sector
89. The microfinance industry continued to register resilience and growth in key
performance indicators following the relaxation of Covid-19 relatedrestrictions on the economy. The number of active clients accessing loans
through microfinance institutions increased by 10.66% from 288 561 as at
31 December 2020, to 307 673 as at 31 December 2021. The industry also
recorded an increase in the number of women accessing loans during the
year from 116 043 to 146 253 as at 31 December 2021. The value of loans
to female borrowers, over the same period increased by 241.10% from
$673.22 million to $2.30 billion as at 31 December 2021.
Microfinance Sector Capitalisation
90. During the year ended 31 December 2021, deposit taking microfinance
institutions have been implementing various initiatives aimed at
strengthening their capital levels and conform to the new minimum capital
requirement of US$5 million which was effective 31 December 2021.
Institutions have made varying progress towards compliance as shown in the
Table 5:

Table 5: Banks Capital Adequacy Status
Institution
Declared Capital as at
31 December 2021
(ZW$)
Declared Capital US$
Equivalent*
(US$1:108.6660)
Status of Compliance
African Century
Limited
534,874,192.80
4,822,185.35
Non-Compliant
To meet through organic
growth.
GetBucks Microfinance
Bank Limited
142,994,535.60
1,315,908.71
Non-compliant
To meet through rights
issue and organic growth
Success Microfinance
Bank Limited
117,645,025.60
1,082,629.58
Non-Compliant
To meet through
shareholder capital
injections.
Zimbabwe Women’s
Microfinance Bank
Limited
359,022,480.00
3,303,908.12
Non-Compliant
To meet through
shareholder capital
injections.
EmpowerBank Limited
254,067,830.33
2,338,061.86
Non-Compliant
To meet through
shareholder capital
injections.
Lion Microfinance
Limited
98,096,130.00
902,730.66
Non-Compliant
To meet through
shareholder capital
injections and organic
growth

*The required minimum capital as at 31 December 2021 was ZW$ equivalent to US$5 million
for Deposit-taking microfinance institutions.


91. It was noted that losses incurred by a few of the DTMFIs since inception has
inhibited the growth while the disruptive effects of Covid-19 pandemic
impacted on the general performance of some institutions.
92. The Bank is satisfied with the various recapitalisation initiatives being
pursued as reflected by African Century Limited’s capital position that is
marginally below the regulatory threshold while other DTMFIs are
envisaged to comply by December 2022.
93. A total of 28 credit-only microfinance institutions were non-compliant with
the minimum capital requirements of US$25 000 effective 31 December
2021. The non-compliant institutions are putting in place re-capitalisation
strategies in order to comply with the requirements and to facilitate
underwriting of more meaningful business.

94. The microfinance sector registered a 231.56% increase in aggregated equity
from $1.68 billion to $5.57 billion as at 31 December 2021. The increase
was attributed to organic growth and fresh capital injection by some
microfinance institutions.

Loan Portfolio
95. The microfinance sector registered a 262.69% increase in total loans from
ZW$2.01 billion as at 31 December 2020, to ZW$7.29 billion as at 31
December 2021. The loan portfolio quality deteriorated as evidenced by the
deterioration of the portfolio-at-risk (>30 days) ratio from 8.34% to 10.06%
as at 31 December 2021.

Profitability
96. Aggregate net profit for the sector increased by 427.16% from ZW$384.77
million to ZW$2,03 billion for year ended 31 December 2021. The increase
was largely attributed to improved operational efficiency as reflected by an
improvement in the average operational self-sufficiency (OSS) ratio from
111.86%, to 168.63% for year ended 31 December 2021, against the
international benchmark of 100%.
97. The improvement in OSS indicates an improvement in the income
generation capacity of the microfinance institutions in the wake of relaxation
of the national Covid-19 lockdown restrictions.

DTMFI Subsector Deposits
98. Aggregate deposits for the DTMFIs sub-sector deposits increased by
105.09% from $442.98 million as at 30 June 2021 to $908.50 million as at

31 December 2021. While the deposit levels remain generally low, the trend
in the level of deposits in the sector is indicative of increasing confidence by
the low-income groups and marginalised in deposit-taking microfinance
institutions.
99. The average prudential liquidity ratio of 101.32% as at 31 December 2021
compares favourably with the minimum prudential requirement of 30%. The
high average prudential liquidity ratio largely reflects the conservative
approach to lending by the sector.

Financial Inclusion Indicators
100. Digitisation of financial services continues to play a pivotal role in driving
access and usage of financial services during the Covid-19 induced
lockdown. The number of active mobile money subscribers increased from
4.05 million to 4,13 million active subscribers during the review period.
101. As at 31 December 2021, banks and deposit-taking microfinance institutions
availed loans to MSMEs, women and the youth by banks valued at
ZW$10.28 billion, ZW$14.39 billion and ZW$6.25 billion compared to
ZW$7.16 billion,

Financial Inclusion Strategy
102. Following the end-term of the National Financial Inclusion Strategy Number
1 (NFIS I) on 31 December 2021, drafting of NFIS II is currently underway.
As part of the development of an evidence-based National Financial
Inclusion Strategy Phase II, a consultant, FinMark Trust, has been engaged
to conduct both the FinScope Micro, Small and Medium Enterprises
(MSME) Survey and the FinScope Consumer Survey with a view to
determining the effectiveness of the strategies deployed under NFIS I, as

well as providing baseline statistics for setting financial inclusion targets for
NFIS II.
103. The MSME and the Consumer FinScope Surveys are running concurrently
with the drafting of the National Financial Inclusion Strategy Phase II. The
NFIS II seeks to address the challenges and gaps noted in the NFIS 1, with
more focus on usage, quality of financial services, fintech & product
innovation, financial inclusion data disaggregation and sustainability.
104. During the year, the Bank will circulate the bi-annual National Financial
Inclusion Bulletin covering financial inclusion activities undertaken by
banking and microfinance institutions during the period under review, to
promote usage of financial services by the underserved segments.

NATIONAL PAYMENT SYSTEMS
105. Notwithstanding the COVID-19 pandemic, the national payment systems
remained safe, sound and stable during 2021. There was notable increase in
the use of available digital channels by the transacting public and the Bank
enhanced security issues on these platforms to protect customers.
106. Digital payment systems transaction values continued on the exponential
growth trajectory with a 218% increase from ZW$2.5 trillion recorded in
2020 to ZW$7.8 trillion in 2021. Transaction volumes, on the other hand,
were on a declining trend, falling by 24% decline to 1.4 billion. (See Annex
1 and 2 for monthly data).

Real Time Gross Settlement (RTGS) System
107. The RTGS system, which caters for large value transactions, registered
improved performance following the upgrade implemented during the last
quarter of 2021.

108. The value of transactions going through RTGS rose by 217% from ZW$1.6
trillion in 2020 to ZW$4.9 trillion in 2021. Volumes recorded a growth of
16% from 10.8 million to 12.4 million during the period under review.

Mobile Banking
109. The Bank is satisfied with developments on mobile money interoperability,
which witnessed a steady upward trend in the figures, with average monthly
growth of 21% and 16% in volumes and values.
110. The Bank remains committed to continuous public education and awareness
on the use of interoperable digital payments in its endeavour to promote
financial inclusion and a cash-lite society.

Cyber Security
111. With increased digital transactions in the country, the Bank sustained
heightened attention to the threat of cyber-attacks on payment systems. The
Bank continued to emphasise the need for financial institutions to implement
effective risk management measures to mitigate cyber risk in line with the
Risk-Based Cyber Security Framework.
112. The Bank further insured that financial institutions complied with the
SWIFT Customer Security Controls Framework for Cybersecurity
management with emphasis on mandatory and advisory security controls.
113. To further enhance and safeguard the card system from cyber -attacks, banks
are required to ensure that their cards are Euro Mastercard and Visa
compliant. In this regard, the Bank encourages financial services providers
to phase out non-EMV complaint cards.

114. While it is encouraging to note that the number of EMV compliant cards
rose from 720 233 in 2020 to 1 935 663, there are still over 3.2 million noncompliant cards and the Bank implores financial services providers to work
diligently to reduce that number to ensure effective consumer protection.

SWIFT ISO 20022 Standard
115. The Bank further reminds financial services providers of the impending
changes under SWIFT ISO 20022 international standard for exchanging
electronic messages which are scheduled to commence on 30 November
2022 with a parallel run up to November 2025 after which the current MT
messages will be phased out.
116. The Bank would like the banking industry to move as a market with a view
to starting testing by mid-2022 and going live with the rest of the SWIFT
global community in the last quarter of 2022 as scheduled.
117. On AML-CFT, the Bank encourages board of directors of banks to
continuously acquaint themselves with their responsibilities with regards to
AML-CFT issues as articulated in the AML-CFT Risk-Based Guideline -
Annexure 1.

FINTECH DEVELOPMENTS
118. The Fintech Regulatory Sandbox (the Sandbox) launched by the Bank in
March 2021 continued to garner interest evidenced by the growing number
of registrations on the platform. As at 31 December 2021, the Sandbox had
received 112 registrations on the online portal and a further 31 applications
at various stages. Registered users came from various sectors with the largest
share of users in software and systems development, 48%; payments, 18%;

capital raising, 7%; investment management, 4%; among others shown in
Figure 17 below.

Figure 17: Sectors of Registered Users
Source: RBZ

119. The Sandbox provides a controlled environment where financial innovations
can be tested. The Bank expects to embark on regulatory testing with
promising Sandbox applications in the near future. The details of approved
Sandbox applications will be shared with the public via the Bank’s website.
The Sandbox remains open for innovations and the guidelines are available
on the Bank’s website.

120. Pursuant to Government’s announcement in November 2021 on the
country’s preference to introduce the central bank digital currency (CBDC)
as opposed to cryptocurrencies, the Bank is actively exploring the feasibility
of adopting a Zimbabwean CBDC including specific design considerations,
opportunities and risks to the monetary and financial system. In this context,
the Bank is developing a clear roadmap for adopting CBDC, encompassing
Banking
8%
Capital Raising
7%
Investment
management
4%
Lending
3%
Other
11%
Payments
18%
Savings and Deposits
1%
Software and Systems
Development
48%

the feasibility and assessment stage currently taking place, policy design
stage based on results of the feasibility study and implementation modalities.
The Bank shall keep the public informed through periodic updates on the
progress of the CBDC programme.

SECTION FIVE
BALANCE OF PAYMENTS DEVELOPMENTS
121. The country’s external sector fundamentals continued to exhibit resilience
as evidenced by strong current account performance in 2021. Preliminary
estimates point to a current account surplus position of US$926.8 million in
2021, representing a 36.6% increase from US$678.3 million recorded in
2020. The resilient secondary income flows and strong merchandise export
growth, supported the current account surplus during 2021. Figure 18 shows
current account developments for the four quarters of both 2020 and 2021.
Figure 18: Current Account Developments (US$ millions)

Source: RBZ Estimates

Merchandise Exports
122. Merchandise exports are estimated to have increased by 28.0% to US$6
315.2 million in 2021, from US$4 931.9 million in 2020, driven by increases
in mineral and agriculture exports, while manufactured exports remained
subdued.
123. Mineral exports underpinned merchandise export growth in 2021, growing
by an estimated 38.4% from US$3 654.1 million realized in 2020, to
-600
-400
-200

2020Q1
2020Q2
2020Q3
2020Q4
2021Q1
2021Q2
2021Q3
2021Q4
Trade Bal
Services Bal
Bal on Primary Income
Bal on secondary Income
Current Account Bal

approximately US$5 057.5 million in 2021. On the global front, safe-haven
demand in the face of Covid-19-induced loose monetary and fiscal policies
supported prices for gold and other precious minerals.
124. Additionally, supply disruptions for Platinum Group Metals (PGMs) in
Russia and South Africa during the first half of 2021, largely on account of
Covid-19 restrictions on the back of strong demand, helped bolster global
PGM prices. Similarly, the relative easing of Covid-19 restrictions in China
and other industrialized countries shored up demand for base metals, and
hence supported their prices. Table 6 shows some selected average
commodity prices for 2020 and 2021 as well as outlook for 2022.
Table 6: Selected International Commodity Prices and Outlook


Actual
Estimate
Projections
Commodity
Unit

Precious Metals
Gold
us$/oz
1,770
1,795
1,750
Platinum
us$/oz

1,091
1,000
Palladium
us$/oz
2,197
2,450
2,021

Rhodium
us$/oz
8,710
18,074
14,800
Base Metals
Copper
us$/tonne
6,174
9,317
8,800
Nickel
us$/tonne
13,787
18,465
17,750
Zinc
us$/tonne
2,266
3,003
2,822
Lead
us$/tonne
1,825
2,200
2,100
Aluminium
us$/tonne
1,704
2,473
2,700
Brent Crude Oil
Brent Crude Oil
us$/barrel

Grains
Maize
us$/tonne

Wheat
us$/tonne

World Bank Price Database, 2022 & KITCO

125. Agriculture exports are estimated to have grown by 7.7% from US$871.7 in
2020 to US$939.1 million in 2021 led by tobacco exports, largely on account
of the good agricultural season the country experienced. Manufactured
exports, however, remained somewhat subdued, weighed down by lower
jewellery and sugar exports amid low competitiveness and consequently loss
of key markets.

Merchandise Imports1
126. Merchandise imports significantly increased by 28.7%, from US$5 070.9
million in 2020 to US$6 525.3 million in 2021, mainly driven by increases
in fuel, machinery and raw material imports. The increase in imports was
reflective of a growing economy whose import absorptive capacity was
increasing. Increasing crude oil, edible oils and fertilizer prices also drove
imports higher. Food imports decreased on account of reduced maize
imports following a good agricultural season.

Services
127. Trade in services continued to be negatively impacted by the Covid-19
pandemic. Resultantly, service exports are estimated to have contracted by
34.9%, from US$331.4 million in 2020 to US$215.9 million in 2021, owing
to sharp contraction in travel, subdued transport and other business service
exports. Covid-19 containment measures imposed by national governments,
limited the movement of people across nations. On the other hand, service
imports firmed by 14.2%, from US$836.3 million in 2020 to US$955.2
million in 2021.
Secondary Income Flows
128. As at 31 December 2021 total International Remittances amounted to
US$2.405 billion, an increase of 46% from US$1.650 billion that was
recorded in 2020. Of the total amount, diaspora remittances amount to
US$1.430 billion, a 43% increase from US$1.002 billion received during the
same period in year 2020.

1 Imports are now higher than previously estimated following the upward revision of fuel imports from 2020 to
date by one of the key data providers.

Table 7: Diaspora Remittances Inflows 2021 and 2020
Month
Year 2021
Year 2020
% Change
January
81,920,000
60,607,249
35%
February
93,424,551
69,230,034
35%
March
125,389,958
61,172,535
105%
April
110,381,374
30,920,048
257%
May
115,575,293
66,815,291
73%
June
123,810,002
85,849,311
44%
July
121,095,703
91,853,269
32%
August
122,909,525
92,835,172
32%
September
128,879,170
98,384,807
31%
October
126,889,655
103,084,503
23%
November
128,155,750
104,241,599
23%
December
151,705,297
137,106,271
11%
Total
1,430,136,278
1,002,100,086
43%
Source: RBZ

Capital and Financial Account Developments
129. The capital account remained in positive territory during 2021, on the back
of continued official capital transfers from the country’s development
partners. Preliminary estimates indicate that approximately US$301.4
million in capital transfers was received in 2021. This represented a marginal
increase from US$299.7 million received in 2020.

130. The economy is estimated to have recorded net portfolio investment
outflows of approximately US$73.9 million in 2021. The financial account
is estimated to have closed 2021 in a net lending (surplus) position of
US$438.9 million, a slight decline from the net lending position of US$496.6
million realized in 2020.

Table 8: BOP Summary (US$ millions)

2020 2021 Est
A. Current Account
920.5
678.3
926.8
Balance on Goods
174.4
-139.1
-210.2
Exports
4663.7
4931.9
6315.2
Imports
4489.3
5070.9
6525.3
Balance on Services
-305.9
-504.9
-740.3
Exports
603.2
331.4
215.7
Imports
909.1
836.3
956.1
Balance on Primary Income
-338.8
-472.9
-655.7
Credits
15.4
7.6
6.6
Debits
354.2
480.5
662.3
Balance on Secondary Income
1390.7
1795.2
2533.0
Credits
1413.4
1828.3
2569.8
Debits
22.7
33.1
36.8
B. Capital Account
314.5
299.7
301.4
Credits
314.5
299.7
301.4
Debits
0.0
0.0
0.0
Net Lending(+)/Net Borrowing(-)(Balance from
CA & KA)
1235.0
978.0
1256.6
C. Net Lending(+)/Net Borrowing(-)(Balance
from FA)
30.9
496.6
438.9
Direct Investment2
-247.1
-153.9
-108.5
Portfolio Investment
-3.7
81.6
73.9
Other Investment
317.0
656.5
-655.9
Special Drawing Rights
0.0
0.0
961.0
Reserve assets
-35.3
-87.6
1129.5
D. Net Errors and Omissions
-1204.1
-481.4
-658.4
Source: RBZ


2 (-inflows, + outflows)

SECTION SIX

NEW MONETARY POLICY MEASURES

131. The current inflationary pressures within the national economy require the
Bank to further tighten monetary policy to stem exchange rate volatility and
anchor inflation expectations, whilst at the same time safeguarding the
ongoing recovery of the economy. In this context, the Bank is putting in
place the following measures to curb inflationary pressures, stabilise the
exchange rate and support the recovery of the economy from the effects of
the Covid-19 pandemic: -
Monetary Targeting Framework
132. The tight monetary targeting framework will remain in place to sustainably
anchor inflation expectations and curtail the speculative demand for foreign
currency which has exerted pressure on the exchange rate and prices since
the last quarter of 2021. To achieve this, the Bank has, with immediate effect,
reviewed downwards the quarter-on-quarter reserve money target from 10%
to 7.5% for the quarters ending March and June 2022, which target will be
reviewed thereafter. The revised quarterly reserve money growth target is
consistent with the envisaged economic growth rate of 5.5% in 2022 and the
expected year-end inflation of 25-35 %.

133. The Bank will also continue with its aggressive liquidity management policy
by aligning its Open Market Operations (OMOs) to liquidity injections by
Government to avoid excess liquidity in the banking system emanating
mainly from payments for infrastructural development projects.

Interest Rate Policy
134. The Bank last reviewed the interest rates in October 2021 to curb speculative
borrowing. In order to avoid further build-up on inflationary pass-through
effects currently emanating from exchange rate indexation and the elevated
global inflation pressures, the Bank policy rate and the Medium Term
Accommodation (MBA) Facility interest rate will be maintained at the
current levels of 60% and 40%, respectively. The Bank, through the
Monetary Policy Committee (MPC), will continue monitoring monetary and
financial conditions and their implications on interest rate policy for possible
future adjustments.

Statutory Reserve Requirements
135. The Bank shall maintain statutory reserve requirements for demand/call
deposits and savings and time deposits at current levels of 10% and 2.5%,
respectively, to promote savings and time deposits, while discouraging
unproductive credit creation.

Exchange Rate Policy and Auction System
136. The Bank shall continue to fine tune the exchange rate policy which is
premised on the foreign exchange auction system to focus on exchange rate
flexibility and promotion of external competitiveness as well as tackling
rent-seeking behaviour.
The refinement of the foreign exchange auction system shall be buttressed by:
a) Strict adherence to and enforcement of the Know Your Customer
(KYC) and Customer Due Diligence (CDD) principles and
requirements by banks when processing forex bids and intra-bank
transfers on behalf of their customers;

b) Timeous settlement of auction bid allotments within a period of two
weeks; and
c) Allotment of foreign currency on the basis of available foreign
exchange to avoid incidences of settlement backlogs.

Promoting the Use of Domestic Currency
137. The current system in the country, where local currency, the Zimbabwe
dollar, is used as a functional currency together with foreign currencies for
payment for goods and services is ideal for promoting growth and
competitiveness of the economy. The use of the local currency has helped
the economy to grow by 7.8% in 2021 following the increased local currency
backed aggregate demand that was necessitated by increased agricultural
output and expansion in Government infrastructural projects.

138. The past experience of the country is quite instructive that promotion of use
of local currency is beneficial. In 2009 the country legislated a fixed
exchange rate under the auspices of dollarisation. Electronic or virtual
currency was commingling with physical foreign currency and the two were
at par. With hindsight, what was supposed to have been done then was to
allow the local currency to be part of the basket of currencies as evidence on
the ground shows that the country did not have sufficient foreign exchange
liquidity to meet its foreign currency commitments even under dollarisation.

139. Legislation of a fixed exchange rate, as was the case in 2009 when the US$
was introduced as the currency of transaction, is not ideal for any economy
as it renders the economy uncompetitive and a supermarket economy and
gives the wrong impression that foreign currency is a domestic currency
which is earned without exporting.

140. Foreign currency needs to be earned from foreign sources such as exports
and remittances and competitiveness of local production becomes very
essential to promote exports, and stability of the local currency is key to
promote investment and for value preservation.

141. It is for the foregoing reasons that promoting the broader use of the
Zimbabwe dollar needs to be embraced by all in the country and all players
within the economy to minimise the sentimental value of holding on to the
past dollarisation era which was fraught with its own challenges. Those
challenges incapacitated the country to service all its foreign obligations
which have now been assumed by Government under Blocked Funds
legislative provisions carried in the Finance Act No. 7 of 2021. Dollarisation
is therefore not a panacea to sustainably and competitively develop the
country.

142. It is thus imperative to broaden the transactions for which the local currency
would be used for payments in the economy for purposes of enhancing
competitiveness and increasing production and productivity. In any case the
financial system is largely constituted of local currency, with around 56% of
total deposits being local currency and the balance of 44% being foreign
currency deposits, which shows that there is no sufficient foreign currency
liquidity to support dollarisation in Zimbabwe. It is for this reason that the
Bank encourages the business community that pays part of its local expenses
in foreign currency to ensure that such payments are proportionate to their
foreign exchange receipts for there to be harmony in the national payment
systems.

143. Against this background, the Bank applauds the decision taken by
Government to allow payment of 50% of royalties by exporters in local
currency and part-payment of duties and taxes in local currency for imported
vehicles as well as levying taxes in foreign and local currency
proportionately to the export retention levels.

144. The Bank is therefore putting in place the following additional measures to
support and promote the use of the local currency in the country:
a) Increasing foreign exchange availability to fuel service stations designated
by the Zimbabwe Energy Regulatory Authority (ZERA) to sell fuel in local
currency.
b) Maintaining minimum deposit rates for savings and time deposits at 10%
and 20%, respectively, to preserve value for local currency deposits.
c) Building foreign exchange reserves to provide the necessary back-up
support for the local currency to enhance its attractiveness through setting
aside 5% of the foreign exchange available for the auction system.
d) Increasing the limit on mobile banking transactions as follows: -
a. Person to business from ZW$20 000 to ZW$25 000 per transaction with
a maximum limit of ZW$100 000 per week; and
b. Person to person from ZW$5 000 to ZW$10 000 per transaction with a
limit of ZW$70 000 per week.
f) Increasing the cash withdrawal limit for the banking public from ZW$2000
to ZW$5000 per week.

Promoting the Use of Digital and Electronic Banking
145. The Bank is encouraged by the tremendous effort being made by banks to
enable cashless transactions through digital and electronic banking services
to their customers, more so during this Covid-19 pandemic. The Bank is

therefore encouraging the public to bank their cash and utilise these digital
and electronic services, that include credit and debit cards, to minimise the
risk of theft and robberies associated with carrying cash on person or
possession of large sums of cash at premises.

Refinement of the US$50 Facility Accessed through Bureaux de Change
146. The Bank availed the US$50 Facility to assist members of the public to
access foreign currency for small domestic purchases and payments at the
official exchange rate through bureaux de change which are allowed to
charge up to 10% over the cost of funds. The Bank, has however, noted,
with concern the abuses of this Facility by some members of the public.

147. In this regard, the Bank is refining the US$50 Facility, with immediate
effect, to limit it to the vulnerable members of the society, that is pensioners,
senior citizens, people living with disability and those requiring forex for
medical purposes.

Export Retention for Manufacturing, Horticulture and Cross-Border
Transport
148. On account of the high import requirements embedded in the manufacturing,
horticulture and cross-border transport sub-sectors of the economy, with
immediate effect, exporters in the manufacturing, horticulture and crossborder transport sub-sectors shall be eligible to retain 100% of the
incremental portion of their export receipts.

149. The export base for these sub-sectors have also been refined to incorporate
their high import requirements.

Export Retention for Tobacco and Cotton Growers
150. The financing models for tobacco and cotton require a refinement of the
export retention threshold to increase participation by small scale growers
and to boost tobacco and cotton production in the country. Accordingly, the
retention threshold for tobacco and cotton growers shall be increased to 75%
for the forthcoming tobacco and cotton marketing seasons. The funds
retained by the growers shall continue to be treated as free funds.

Export Retention for Tourism and Hospitality Industry
151. In order to respond to the adverse effects of COVID-19 on the tourism
sector, which was hard-hit by the pandemic not only in Zimbabwe but the
world over, with immediate effect, players in the tourism and hospitality
industry shall retain 100% of their foreign currency earnings to allow them
to quickly recapitalise and procure the necessary goods and services required
by tourists and travellers.

Incremental Export Retention for Tobacco Merchants
152. Tobacco merchants will retain 80% on the portion of the incremental value
addition repatriated into the country and 100% of proceeds from local sales
of tobacco through inter-merchant sales.

Capitalisation of Banking Institutions
153. Cognisant of the disruptive effects of covid-19 and the need to complete
banks’ capital raising processes currently underway, the Bank has extended,
on a case by case basis, the compliance deadline to 31 December 2022 for
banks and deposit taking microfinance institutions that failed to meet the
capitalization requirement by 31 December 2021.

154. Banks and deposit-taking microfinance institutions that failed to comply
with the minimum capital requirements as at 31 December 2021 shall;
a) not be permitted to pay dividends without prior approval of the Bank
until such a time they have met the new minimum capital requirement;
and
b) be required to immediately submit to the Bank revised board approved
capital plans and quarterly updates on capital raising initiatives.

Cloud Computing
155. The Bank is supportive of the initiatives being pursued by banking
institutions in exploring the benefits of technological advancements such as
cloud banking services as a means of fulfilling their business and operational
requirements. In this regard, banking institutions planning to adopt cloud
services are required to:

a) take proactive steps and consider the new risk universe associated with data
access, ity, integrity, sovereignty, recoverability, auditing,
legal and regulatory compliance; and
b) ensure that independent audits and/or expert assessments of cloud service
outsourcing arrangements are conducted by qualified auditors, as part of
due diligence reviews.

Monitoring Compliance
156. With effect from 31 March 2022, every banking institution and its
controlling company shall be required to conduct a quarterly compliance risk
self-assessment in the form and template provided by the Bank.

Sustainability and Climate Related Risks
157. In an effort to enforce sustainability practices in the financial sector to foster
a strong, resilient and inclusive financial system, the Bank has directed banks
to:
a. integrate their sustainability principles, including those covering
environment and climate related issues and social areas, into their
corporate governance framework and risk management systems and
practices; and
b. ensure that their boards have a representative(s) with the requisite
qualifications, competence and experience to provide adequate
guidance on sustainability issues.


SECTION SEVEN
ECONOMIC AND INFLATION OUTLOOK

158. The tight monetary policy stance pronounced in this Statement will support
the on-going real economic recovery growth of 5.5% expected in 2022 and
higher potential growth rates in the medium to long term, consistent with
NDS1 and Vision 2030. This, coupled with the on-going strong coordination
between fiscal and monetary policy and recovery of the global economy from
the covid-19, will sustain the envisaged domestic growth rate in the outlook

period. Moreover, the significant increase in locally produced goods to current
levels of over 80%, coupled with policies announced in this Statement, is
expected to reduce inflationary pressures in the economy.

159. More specifically, the envisaged sustained tighten monetary policy stance
will go a long way in anchoring price spectrums in the economy. As a result,
month-on-month inflation is expected to be reduced to below 4% in the first
quarter of the year and to average below 3% in the second half of 2022. This
path is expected to reduce the country’s annual inflation rate to a range of
25-35% by end of December 2022 as shown below in Figure 19.

Figure 19: Inflation Outlook

Source: RBZ
160. The tight monetary stance will be buttressed by a strong liquidity
management programme being administered jointly by the Bank and Fiscal
Authorities. In this regard, the Bank is pleased with the Fiscal Authorities’
efforts in managing the liquidity implications of Treasury outlays. Going
forward, Treasury and the Bank will continue to strengthen the Liquidity
Management Committee, which is made up of the Bank and Treasury staff
to ensure proper sequencing and sterilisation mechanisms to maintain
monetary stability.
161. Surveillance activities will also be enhanced to curb malpractices and cases
of breaches of the Bank Use Promotion Act, currency manipulation and
abuse of the auction system by some individuals and business entities.


Dec-19
Mar-20
Jun-20
Sept-20
Dec-20
Mar-21
Jun-21
Sept-21
Dec-21
Mar-22
Jun-22
Sept-22
Dec-22
Baseline
Policy

SECTION EIGHT
CONCLUSION
162. The Bank’s focus to further tighten monetary policy is necessary to stem
inflationary pressures and anchor inflation and exchange rate expectations
within the national economy. Controlling inflation is essential to preserve
the value of the local currency and to minimise the appetite for quick
conversion of the local currency into foreign currency – behaviour caused
by past experiences.

163.
The Bank strongly believes that attaining exchange rate and price stability
is achievable under the current monetary policy stance which is supported
by a complementary fiscal policy. Further decline in inflation will go a long
way in preserving the value of local currency as well as increasing the
demand for local currency and minimising appetite for quick conversion of
local currency into foreign currency.

164. In addition, the enhancement of the liquidity management programme with
well-timed sequencing and sterilisation mechanisms implemented by the
Bank and Treasury through the Liquidity Management Committee will
ensure that the twin policy objectives of stability and growth are met.

165. Overall, the anticipated decline in inflation and the ensuing macroeconomic
stability will go a long way in enhancing the country’s happiness index
which had been subdued in previous years due to macroeconomic
instabilities worsened by catastrophes such as Cyclone Idai, Covid-19 and
climatic shocks.

166. The effectiveness and predictability of monetary policy requires the
support of consumers and business. In this regard, the Bank is encouraged
with the continuous moral suasion engagements which it has established
with the business community to find lasting solutions to stabilising the local
currency and improve trust within the economy. This is critical for the
common good of the economy in pursuing common objectives which is
fundamental for unity of purpose.

I Thank You

John P Mangudya
Governor


ANNEX MONTHLY TRANSACTION VALUES 2020 AND 2021
TRANSACTION VALUES IN BILLIONS
MONTH
RTGS
ATM
POS
Mobile Internet
Values
Total
Total
Change
Jan-20

Feb-20

Mar-20

Apr-20

May-20

Jun-20

Jul-20

Aug-20

Sep-20

Oct-20

Nov-20

Dec-20

TOTAL


Proportion

Jan-21

Feb-21

Mar-21

Apr-21

May-21

Jun-21

Jul-21

Aug-21

Sep-21

Oct-21

Nov-21

Dec-21


TOTAL

Proportion


Change

ANNEX MONTHLY TRANSACTION VOLUMES 2020 AND 2021
TRANSACTION VOLUMES IN MILLIONS
MONTH
RTGS
ATM
POS
Mobile Internet
Total
Volumes
Total
Change
Jan-20

Feb-20

Mar-20

Apr-20

May-20

Jun-20

Jul-20

Aug-20

Sep-20

Oct-20

Nov-20

Dec-20

TOTAL 2020

Proportion

Jan-21

Feb-21

Mar-21

Apr-21

May-21

Jun-21

Jul-21

Aug-21

Sep-21

Oct-21

Nov-21

Dec-21

TOTAL 2021

Proportion


Change

Reserve Bank of Zimbabwe 80 Samora
Machel Avenue Box 1283
Harare, Zimbabwe
Tel: (+263) 242703000
Email:
Reserve Bank of Zimbabwe
93 Leopard Takawira Street
Box 399 Bulawayo, Zimbabwe
Tel: +263 8677002046
Email:
R
E
S
E
R
V
E
B
A
N
K
O
F
Z
I
M
B
A
B
W
E