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2021 MID-TERM MONETARY POLICY STATEMENT
FOSTERING PRICE STABILITY
BY
JOHN PANONETSA MANGUDYA
GOVERNOR

5 AUGUST 2021

TABLE OF CONTENTS
EVALUATION OF THE PREVIOUS MONETARY POLICY MEASURES ... 8
MONETARY POLICY MEASURES FOR THE SECOND HALF OF 2021 ... 45

LIST OF FIGURES
Figure 3:Monthly Banks’ Excess Account Average Balances (ZW$ Million) .. 11
Figure 9:Comparative DFS Monthly Values and Volumes for Six Months ended
Figure 10: RTGS Values & Volumes for the Six Months ended June 2021 and
Figure 11: Mobile Money Interoperability Values Incoming and Outgoing from
Figure 13: International Oil & Food Price Changes (January to June 2021) .... 33

LIST OF TABLES

SECTION ONE
INTRODUCTION AND BACKGROUND
1.
This Monetary Policy Statement (the Statement) comes at a time when
Government has ably shown steadfast commitment to sustaining the
economic reform momentum. Despite the difficulties caused by the Covid19 pandemic, the economy is on the rebound.
2.
The close coordination between fiscal and monetary authorities, as shown
by the sustained fiscal discipline and tight monetary conditions, coupled with
the smooth operation of the Foreign Exchange Auction System, have
fostered macroeconomic stability.
3.
Accordingly, inflationary pressures in the economy have dissipated, thus
creating a conducive monetary and financial environment essential to
supporting the envisaged growth of 7.8% in 2021 and a robust economic
growth in the medium term.
4.
The anticipated recovery of the global economy in 2021 and the spill-over
effects of the stimulus packages in the developed countries and Asia,
together with the soon to be availed SDR allocations of US$650 billion into
the world economy by the International Monetary Fund (IMF), are expected
to have a positive trickle-down effect on the country’s growth trajectory.
5.
The Bank is confident that the current stability of inflation and exchange
rates, supported by a buoyant external sector performance, will continue in
the outlook period. The external sector performance has also been driven by
strong recovery of the global economy, projected at 6% this year. The strong
global economic recovery has resulted in a rally in international commodity

prices, particularly of platinum, nickel and copper. Moreover, tobacco prices
have been firmer at an average price of US$2.92/kg during the just-ended
marketing season compared to the previous season where the average price
was US$2.55/kg.
6.
On account of the strong external sector performance, foreign currency
receipts have remained buoyant, with US$4.02 billion having been received
in the first half of the year, compared to USD3.12 billion received over the
same period in 2020, representing a 29.1% increase in foreign currency
supply into the economy. Of this amount, diaspora remittances received
through the formal system amounted to US$649 million, an impressive 73%
increase from US$374.6 million received during the same period in 2020.
7.
These positive economic developments are key in sustaining the Foreign
Exchange Auction System which has had a significant impact on the national
economy since its inception on the 23rd of June 2020. Commendably, the
Foreign Exchange Auction System which has to date disbursed US$1.72
billion has ensured uninterrupted financing of importation of key raw
materials and equipment for the productive sectors of the economy. Capacity
utilisation in the manufacturing sector has, as a result, increased from 36%
in 2019 to 47% in 2020 and is expected to further increase to above 61% in
2021.
8.
Against this background, this Statement which is issued in terms of Section
46 of the Reserve Bank of Zimbabwe Act [Chapter 22:15] reviews the
monetary policy measures pursued by the Bank since the last Statement and
outlines the new monetary policy measures to be followed by the Bank in
the second half of the year.

9.
The rest of this Statement is organized as follows: Section two provides an
evaluation of the previous monetary policy statement issued in January 2021.
Section three discusses the financial sector developments. Section four
discusses inflation developments and outlook based on current and expected
monetary and financial conditions. Section five discuses balance of
payments developments and outlook. Section six gives new monetary policy
measures necessary to sustain the ongoing price and financial sector
stability. Section seven provides an update on disposal of Bank assets and
finally section eight concludes the Statement.

SECTION TWO
EVALUATION OF THE PREVIOUS MONETARY POLICY
MEASURES

10. The Monetary Policy Committee (MPC) of the Bank maintained the Bank
policy rate at 40% and the medium-term policy rate at 30% during the first
half of 2021. The Bank also continued to undertake appropriate open market
operations, in line with its monetary targeting framework, to ensure that
money supply remained within growth enhancing and inflation neutral
levels. These measures, along with the MPC’s forward guidance on interest
rates, have helped create and sustain the current accommodative monetary
and financial conditions.

Management of Money Supply
11. The Bank put in place a reserve money growth target of 25% per quarter in
2020, which was reduced to 22.5%, beginning January 2021. In order to
sustain the macroeconomic stability brought about by the restrictive
monetary policy stance, the Bank further reduced the quarterly reserve
money growth target to 20% for the remaining two quarters of 2021. This
move was necessitated by heightened speculative pressures on the parallel
market, which have a potential destabilising effect on price stability. Figure
1 shows reserve money performance for the first half of 2021 against set
targets.

Figure 1: Reserve Money Developments in 2021:ZW$ billion
Source: RBZ
12. Following reduction in the quarterly reserve money target to 20%, reserve
money will now be contained within a target of ZW$29 billion by end of
September 2021, and to no more than ZW$35 billion by December 2021.
13. The Bank will continue to review the quarterly reserve money growth target,
in line with inflation and exchange rate developments, as well as other
macroeconomic developments. Figure 2 shows that there is a positive
correlation between reserve money growth and inflation, which justifies the
use by the Bank of the monetary targeting framework, among other measures
and instruments to control inflation.

ZW$ Billion
Actual Reserve Money
Q1 2020 Target
Q2 2020 Target
Q3 2020 Target
Q4 2020 Target
Q1 2021 Target
Q2 2021 Target

Figure 2: Inflation and Annual Reserve Money Growth
Source: RBZ & ZIMSTAT
14. As at end-June 2021, reserve money stock stood at ZW$24.17 billion, well
within the target of ZW$28 billion.
Money Market Liquidity
15. As a reflection of the Bank’s conservative monetary policy stance under its
Reserve Money Targeting Framework, banks’ average monthly liquidity
position (average excess balances) at the Bank which stood at ZW$17.5
billion in January 2021 declined to ZW$14.5 billion in March 2021 and
further to ZW$ 13 billion in June 2021. As at 23 July 2021, the banks’
average liquidity position stood at ZW$12.6 billion. The monthly average
balances trend in 2021 is reflected in Figure 3.

Jan-19
Feb-19
Mar-19
Apr-19
May-19
Jun-19
Jul-19
Aug-19
Sep-19
Oct-19
Nov-19
Dec-19
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
Annual Reserve Money Growth
Inflation
Annual Inflation
Annual Reserve Money Growth

Figure 3:Monthly Banks’ Average Liquidity Position at RBZ (ZW$ million)
Source: RBZ
Open Market Operations
16. The Bank’s open market operations were largely undertaken through the
issuance of the 7% Savings Bonds which were then complemented by the
introduction of the 5% OMO Savings Bonds in October 2020. The 7%
Savings Bonds were issued for tenor ranging from one year to three years,
with the option to discount after 30 days, while the 5% OMO Savings Bonds
had tenor of up to 7 days.
17. As the market liquidity continued to increase, a new instrument, the zero
percent Non-Negotiable Certificate of Deposit (NNCD) was introduced at
the beginning of June 2021. This instrument replaced the 5% OMO Savings
Bond. The NNCD ensured that the Bank meets its reserve money targets,
culminating in the MPC reducing the quarterly reserve money growth rate
from 22.5% to 20% from the June 2021 quarter.

Jan
Feb
Mar
Apr
May
Jun
Jul

18. To avert any gridlocks in the payment system arising from the open market
operations, banks can access the balances mopped in NNCDs as long as they
utilise the funds and their excess balances are within their set limit. This
system has worked exceptionally well and has also resulted in increased
intermediation as banks are now deploying some of their excess (idle)
balances for lending to their customers and purchase of Government
securities.

Productive Sector Support Facilities
19. The Bank introduced the Medium-term Bank Accommodation Facility in
November 2019 largely focused on supporting agricultural production.
Support was extended for the Winter Wheat Planting Programme during the
2020 season and this helped in the realisation of a decent wheat crop of over
161 432 metric tonnes, enough to cover more than 5 months of the country’s
requirements. This saw the country saving foreign currency as millers were
able to access local wheat. It is therefore imperative that such support
programmes are implemented to substitute imports.

20. The outstanding amount under the Medium-term Bank Accommodation
Facility stands around ZW$4.13 billion. In May 2021, the MPC approved an
additional ZW$2.5 billion for winter wheat farming.

21. Following the debilitating impact of the Covid-19 induced lockdowns on the
micro, small and medium enterprises (MSMEs), the MPC introduced a
ZW$500 million facility to cater for the funding requirements of MSMEs.
The facility is available for up to 12 months for working capital and up to 3
years for capital expenditure. The facility is accessed through banks,
microfinance banks as well as credit only microfinance institutions.

22. The interventions by the Bank are available through the banking sector at an
interest rate determined by the MPC and currently pegged at 30% per annum.
Banks and other lenders participating in these facilities are expected to
charge a maximum margin of 10 percentage points above the rate charged
by the Bank, in this case, not exceeding 40% per annum.
Statutory Reserve Ratios
23. As part of its operations under the Reserve Money Targeting Framework,
the Bank adjusted statutory reserve ratios in February 2021, from 2.5% to
5% for local currency demand and call deposits, whilst the ratio for time
deposits was maintained at 2.5%. In this regard, statutory reserve balances
which stood around ZW$2.5 billion in February 2021 rose to ZW$7.8 billion
as at 23 July 2021. This growth reflects the transitory nature of deposits in
the banking sector as most of the banks’ liabilities to the public are largely
demand and call deposits. The statutory reserves growth trajectory is
highlighted in Figure 4.
Figure 4: Statutory reserves from Jan 2021 23 July to 2021 (ZW$ million)
Source: RBZ

4-Jan-21
18-Jan-21
1-Feb-21
15-Feb-21
1-Mar-21
15-Mar-21
29-Mar-21
12-Apr-21
26-Apr-21
10-May-21
24-May-21
7-Jun-21
21-Jun-21
5-Jul-21
19-Jul-21

Payment of Interest on Deposits

24. In recognition of the role played by savings and deposits in the economy and
the need to support financial inclusion and development, the Bank engaged
the Bankers Association of Zimbabwe on the need to comply with Statutory
Instrument 65A of 2020 on the payment of interest on savings accounts. As
a result, effective 1st July 2021, banking institutions scrapped bank charges
on savings accounts and fixed term deposits and also agreed to offer
minimum interest rates as shown in Table 1.

Table 1: Interest on Savings and Fixed Term Deposits

ZW$
USD
Savings Accounts
Minimum of 5% per
annum
Minimum of 1% per
annum
Fixed Term Deposits
Minimum of 10% per
annum
Minimum of 2.5% per
annum
Source: RBZ

25. The Bank, in consultation with the Deposit Protection Board, is exploring
mechanisms to protect foreign currency deposits. In addition, consultations
are also ongoing to encourage banks to leverage on the foreign currency
deposits to enhance financial intermediation for the benefit of the economy.
These measures will allow the circulation of the US$1.7 billion currently
sitting in FCA accounts, to promote growth and development.

Introduction into Circulation of Z$50 Banknote
26. In order to improve efficiency and convenience to the public, the Bank
introduced ZW$50 banknotes into the national economy on the 7th of July
2021. All banknotes and coins issued by the Bank since 2016 remain legal
tender in Zimbabwe. The banknotes and coins have not expired and hence
the behaviour by some traders to reject some of the notes in circulation to

the detriment of members of the public is deplorable and an unfair way of
conducting business. That wayward behaviour is spurred by negative ulterior
motives which are associated with arbitrage and the practice of not banking
money. The Bank encourages the public not to be short-changed by such
traders and to report such unbecoming behaviour to the Bank or the Financial
Intelligence Unit (FIU) or the Zimbabwe Republic Police for corrective
action to be taken against such malpractices.
Foreign Exchange Auction System
27. The Foreign Exchange Auction System, which attained its first anniversary
on 23 June 2021, has contributed immensely in bringing transparency in the
trading of foreign currency as well as the stability in the exchange rate which
has culminated in price stability.
28. After 56 Main and 50 SMEs auctions, a total of US$1.72 billion had been
allotted as at 27 July 2021, representing 98% of total bids submitted to the
auction. Reflecting the importance of the SMEs sector, the share of
allotments of the SME Auction to total allotments grew from 3.5% in the
third quarter of 2020 to about 14% in the second quarter of 2021.
29. The efficient allocation of foreign currency through the Foreign Exchange
Auction System has contributed to increased confidence and growth in
economic activity. Encouragingly, the Foreign Exchange Auction System
continues to support the productive sectors of the economy with more than
70% of foreign exchange allotted going towards these critical sectors.
Those in the manufacturing sector accounted for 17 out of the top 20 auction
beneficiaries during the period under review. Figure 5 shows the distribution

of foreign currency through the Foreign Exchange Auction System by end
of July 2021.
Figure 5: Distribution of Foreign Currency through the Foreign
Exchange Auction System (27 July 2021)
Source: RBZ
30. Ramping up of production has also been necessitated by the increase in
investment, given that the foreign exchange auctions have so far outlaid
around US$325.0 million which has been utilised by businesses to capitalise
their operations.
31. Similarly, the response by the country’s manufacturing sector to the Foreign
Exchange Auction System has been quite encouraging with 65 – 70% of
products in the retail sector now being produced locally - a significant leap
in import substitution. Other entities are venturing into the export market.
32. Increased capacity utilisation by industry has resulted in an increase in the
demand for foreign currency on the Foreign Exchange Auction System. This
Raw Materials
43%
Machinery and
Equipment
19%
Retail & Distribution
8%
Services
7%
Consumables
10%
Fuel, Electricity & Gas
6%
Medicals & Chemicals
7%

saw demand rising from about US$30 million per week in December 2020
to around US$45 million per week in July 2021.
Statutory Instrument 127 of 2021
33. In a bid to curb arbitrage and speculation with foreign currency obtained from
the Foreign Exchange Auction System, Government gazetted the Presidential
Powers (Temporary Measures) (Financial Laws Amendment) Regulations,
2021, Statutory Instrument 127 of 2021 (SI 127) to enable the Bank to levy
civil penalties against abusers of Foreign Exchange Auction System, among
other things. It is the view of the Bank that SI 127 will continue to foster
discipline in the market and safeguard the stability that has so far obtained in
the economy.
34. In line with the Bank’s Press Statement of 15 June 2021, efforts to foster
compliance in terms of SI 127 shall be limited to outliers that wantonly abuse
the Foreign Exchange Auction System, manipulate the exchange rate and do
not comply with exchange control rules and regulations.
35. Through investigations by the Financial Intelligence Unit (FIU) and the Bank,
27 entities have so far been fined for failure to adhere to the rules of the
auction system and flouting the exchange control rules and regulations.
Foreign Exchange Mobilisation
36. The Bank continues to engage its offshore partners to unlock critical external
funding to support the economy. Notwithstanding the adverse impact of the
Covid-19 pandemic to mobilise foreign finance required in the economy, the
Bank successfully restructured its obligations with the African Export-Import
Bank (Afreximbank) during the first half of 2021 into a longer-term facility,

a move that has reduced the repayment burden and unlocked capacity to avail
more resources for balance of payments support to the economy.

37. The Bank has also put in place a US$150 million Letter of Credit (LC) facility
with Afreximbank, which will see participating banks issue letters of credit to
their qualifying clients to import essential raw materials and other inputs to
support the current growth trajectory. The LCs will go a long way in easing
pressure on the Foreign Exchange Auction System as some of the critical
imports will be financed under this arrangement.

Interbank Foreign Exchange Market
38. Apart from the Foreign Exchange Auction System which accounts for
around 30% of the total market foreign exchange transactions, the interbank
foreign exchange market continues to be operational using the auction
determined foreign exchange rate. The interbank foreign exchange market
traded around 7% of total market transactions from January to July 2021.
Around 63% of the market transactions are processed through bank
customers’ foreign currency accounts.

SECTION THREE

FINANCIAL SECTOR DEVELOPMENTS

39. The banking sector has remained stable, safe and sound, despite the
disruptive impact of the Covid-19 pandemic. Government support and
regulatory relief measures implemented thus far, have cushioned the
economy and muted the potential adverse impact to the banking sector’s
performance. The measures ensured continued orderly functioning of the
financial markets, continuous flow of credit and fostered financial sector
stability.

40. As at 30 June 2021, the banking sector comprised 13 commercial banks, five
building societies, and one savings bank. In addition, there were 178 creditonly
microfinance
institutions,
eight
deposit-taking
microfinance
institutions and two development financial institutions under the purview of
the Bank.

Condition and Performance of the Banking Sector
41. The banking sector financial soundness indicators are depicted in Table 2.

Table 2: Financial Soundness Indicators
Key Indicators
Benchmark June-20
Dec -20
Mar-21
June -21
Total Assets (ZW$ Billion)

Total Loans & Advances (ZW$ Billion)

Net Capital Base (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 (%)


Non-Performing Loans Ratio (%)


Liquidity Ratio (%)


Source: RBZ
Banking Sector Capitalisation
42. The banking sector remained adequately capitalized, with aggregate core
capital of ZW$57.54 billion as at 30 June 2021, an increase of 8.09%, from
ZW$53.18 billion as at 31 December 2020. The banking sector average
capital adequacy and tier one ratios of 35.32% and 25.05% respectively,
were above the regulatory minima of 12% and 8%, respectively.
43. In line with the Monetary Policy Statement of August 2020, banking
institutions submitted updated capital plans to the Bank as at 30 June 2021,
which were reviewed for credibility. The Bank established that banking
institutions are making significant progress towards meeting the new

minimum capital requirements which are effective 31 December 2021. The
strategies being pursued by banking institutions to comply with the new
minimum capital requirements are largely based on organic growth and
capital injection by the shareholders.

Banking Sector Loans and Advances
44. Total banking sector loans and advances increased by 73.27% from
ZW$82.41 billion as at 31 December 2020 to ZW$142.79 billion as at 30
June 2021. During the period under review, financial intermediation
remained stable as reflected by a loans to deposits ratio of 45.84%. This
position reflects that there is scope for banking institutions to enhance their
financial intermediation role.

45. The banking sector continued to support the productive sectors of the
economy, as reflected by the ratio of loans to productive sectors to total loans
80.89% as at 30 June 2021, and as further shown in the Figure 6.

Figure 6: Sectoral Distribution of Loans as at 30 June 2021
Source: RBZ
Asset Quality
46. The performance of loan portfolios of banking institutions was satisfactory
as reflected by the average non-performing loans (NPLs) to total loans ratio
which remained low at 0.55% as at 30 June 2021, against the international
benchmark of 5%, reflecting sound credit risk management systems and
internal controls. In the outlook period, credit risk is expected to remain low.
CONSUMPTIVE
17.35%
OTHER
1.76%
AGRICULTURAL
32.51%
MANUFACTURING
11.31%
COMMERCIAL
7.06%
MINING
5.92%
DISTRIBUTION
10.93%
CONSTRUCTION
0.76%
TRANSPORT
1.47%
COMMUNICATION
0.27%
FINANCIAL
7.07%
MORTGAGE
3.59%
Productive
80.89%

Figure 7: Trend in Non- Performing Loans: December 2015- June

Source: RBZ
Zimbabwe Asset Management Company (ZAMCO)
47. The role of the Zimbabwe Asset Management Company (ZAMCO) in
improving the banks’ asset quality has been phenomenal. The acquisition of
NPLs by ZAMCO helped improve and enhance the capital adequacy and
earnings of banks through removal of toxic assets and replacing them with
risk free assets (treasury bonds) thus providing earning assets that could be
used to unlock liquidity as security.
48. ZAMCO has managed to pay off its obligations of ZW$1.2 billion to
Government ahead of the sunset time of 2025 and plans to wind off its
operations in line with section 57A of the Reserve Bank of Zimbabwe Act
are underway.
Banking Sector Deposits and Liquidity
49. Aggregate deposits amounted to ZW$304.95 billion (51% in local currency
and 49% in foreign currency) as at 30 June 2021, which represented a

Dec-15
Dec-16
Dec-17
Dec-18
Dec-19
Mar-20
Jun-20
Sep-20
Dec-20
Mar-21
Jun-21
Level of NPLs Ratio

49.39% increase from ZW$204.13 billion reported as at 31 December 2020.
Meanwhile, the average prudential liquidity ratio for the banking sector
remained largely stable at 66.89%, which was above the minimum
regulatory requirement of 30%. The high average prudential liquidity ratio
largely reflects the conservative approach to lending by the sector.

Enhancement of Credit Infrastructure
50. The enhanced credit referencing environment has improved credit risk
management in the sector by providing timeous and reliable credit
information. The Credit Registry recorded a significant increase in enquiries
from 813,298 as at 30 June 2021 to 1,317,853 as at 30 June 2021.

51. The Credit Registry held over 1.45 million records, of which 524,342 were
active loan accounts. Individual records represented 98% of the active loan
records in the Credit Registry. Registered subscribers currently accessing the
Credit Registry were 209 as at 30 June 2021.

52. With respect to operationalising the Collateral Registry, the Bank has
commenced working on the system prototype together with BSystems
Limited of Ghana, following a successful tender process. The definition of
business specifications which guides the vendor in the implementation
process have been completed.

Financial Inclusion Indicators
53. Access and usage of financial services and products continued on an upward
trajectory with the increased adoption of digital platforms, on the back of
high mobile penetration rate in the country. The number of active mobile
money subscribers increased from 5.2 million to 6.4 million active

subscribers during the period under review, underpinned by the Bank’s
efforts to promote electronic payments and a cash-lite society.
54. The value of loans availed to MSMEs, women and the youth by banks and
deposit-taking microfinance institutions increased from ZW$3.01 billion,
ZW$3.28 billion and ZW$1.94 billion as at 31 December 2020, to ZW$3.96
billion, ZW$5.03 billion and ZW$2.71 billion as at 31 March 2021,
respectively.
Sustainable Financing
55. There is a shift globally towards prioritising the sustainability agenda,
against the realisation that strong and resilient institutions contribute
meaningfully to sustainable economic development and attainment of
Sustainable Development Goals (SDGs) by 2030.
56. The Bank continues to work closely with local financial institutions in the
implementation of the Sustainability Standards & Certification Initiative
(SSCI) being driven by the European Organisation for Sustainable
Development (EOSD). The participating institutions have registered
significant progress in comprehending the key pillars of SSCI.
Legal & Regulatory Developments
57. The Bank continues to strengthen the regulatory framework in line with its
mandate of promoting financial stability. On 6 November 2020, the Banking
(Amendment) Regulations No. 5 of 2020 was gazetted. The amendment
aligns the Banking Regulations S. I. 205 of 2000 to the Banking Act [Chapter
24:20] following amendments effected in 2015 and provide for the minimum
capital requirements and enhanced corporate governance standards.

58. The amendments reduce significant interest threshold from 10% to 5% in
line with the new section 15B (1) of the Banking Act, increase the maximum
shareholding that an ordinary company can have in a banking institution
from 10% to 25% in line with the new threshold limits in section 15A (1) of
the Banking Act, provide for the disclosure of interests form as required
under the new section 20B of the Banking Act and provide additional
prudential limits for lending to insiders and their related interests. In
addition, the amendment provides for the previously announced minimum
capital requirements for banking institutions which are effective 31
December 2021.
59. Banking (Amendment) Regulations Statutory Instrument 63 of 2021 was
gazetted on 5 March 2021 to increase the maximum amount that may be lent
to a related party without the conditions specified under section 35 of the
Banking Act.
Business Continuity & Digitisation
60. The Bank has noted that Covid-19 has accelerated and deepened the use of
technology in the provision of financial services in the banking sector for
convenience of the banking public. In addition, banking institutions have
successfully transitioned to the virtual operating model. The digitization of
the financial services, however, has heighted cyber security risk. In this
regard, banking institutions are mandated to enhance cyber risk management
systems, including upgrading core banking systems and information access
security controls on an on-going basis.
Fintech Developments
61. The Bank is cognisant of the speed at which financial technology is evolving
globally and has taken a proactive approach to ensure financial innovation

does not destabilise Zimbabwe’s financial system. To this effect, the Bank
formed a Fintech Unit responsible for researching and monitoring Fintech
developments in the country. To foster responsible innovation, the Bank
established a Regulatory Sandbox in March 2021, which provides a platform
for testing new financial innovations in a regulated environment before the
technology is ushered to the market.

62. Since the launch of the Sandbox in March 2021, the Bank has witnessed 58
Fintech registrations on the online portal and an additional 14 applications
at various stages. In addition, about 859 unique visitors from 45 countries
including Zimbabwe have also visited the platform to date. Registered users
come from various sectors with the largest share of users in Software and
systems development, 54%; payments, 17%; capital raising, 7%; investment
management, 5%; among others shown in the figure 8.

Figure 8: Sectors of Registered Users

Source: RBZ, 2021

Banking
3%
Capital Raising
7%
Investment
management
5%
Lending
3%
Other
9%
Payments
17%
Savings and Deposits
2%
Software and Systems
Development
54%

63. The Fintech Regulatory Sandbox is open for innovations and the Guidelines
are accessible on the Bank’s website.

64. The Bank has also received a number of expressions of interest from Fintech
service providers who are eager to support the Bank with the roll out of
Fintech services. The Bank is, however, cautious about the potential impact
of digital currencies, given the sensitivities around currency issues in the
national context. As such, the Bank will remain guided by international
developments on Fintech issues and guidance from the IMF and the SADC
Committee of Central Bank Governors (CCBG).

National Payments Systems
65. The national payment system remained stable and resilient during the first
half of 2021, underpinned by a robust regulatory oversight, reliable and
efficient financial market infrastructure to weather the negative impact of
Covid-19.

66. The value of digital payment systems (DPS) grew by 245% during the first
half of 2021 compared to the same period in 2020. Volumes, on the other
hand, fell by 27%, as shown in Figure 9.

Figure 9:Comparative DFS Monthly Values and Volumes for Six
Months ended June 2021
Real Gross Settlement System (RTGS)
67. A total of 5.3 million transactions valued at ZW$1.56 trillion were processed
through ZETSS during the first half of 2021.
Figure 10: RTGS Values & Volumes for the Six Months ended June
2021 and 2020

January
Febraury
March
April
May
June
Millions
Values in Billions (ZWL
Values 2020
Values 2021
Volumes 2020
Volumes 2021

-

jan
feb
mar
apr
may
jun
Thousands
Values in Billions (ZWL$)
Values 2020
Values 2021
Volumes 2020
Volumes 2021

68. The recently launched “Digital Economy for Zimbabwe Country Diagnostic
Report by World Bank (March 2021)” acknowledged that the country has
achieved 96% digital transactions against 4% cash largely due to a welldeveloped payment system.

Cyber Security
69. While the Bank considers cybersecurity to be a critical component in the
provision of digital financial services, there has been threats to financial
stability due to the rise in cyber risk, as the economy witnessed increased
interconnectivity financial ecosystems and digitalisation. Cyberattacks
present
dangers
to
the
functioning of
financial infrastructures,
ity, integrity and availability of data, thereby creating both
reputational and direct financial risks.

70. To mitigate against the increase in cyber risk, the Bank issued a
comprehensive Risk-Based Cyber Security Framework to regulated entities
under its supervision as part of efforts to promote financial stability,
inclusion and integrity.


Interoperability
71. Following the promulgation of Statutory Instrument 80 of 2020 on
interoperability, the Bank is pleased with the convenience brought in the
movement of funds across players particularly during this new normal
brought about by covid-19 pandemic.

Figure 11: Mobile Money Interoperability Values Incoming and
Outgoing from October 2020 to June 2021
Source: RBZ

-


Oct-20
Nov-20
Dec-20
Jan-21
Feb-21
Mar-21
Apr-21
May-21
Jun-21
Volumes in Thousands
Values in Billions
Incoming Values LHS
Outgoing Values LHS
Incoming Vol RHS
Outgoing Vol RHS

SECTION FOUR
INFLATION DEVELOPMENTS AND OUTLOOK
72. In the previous monetary policy statement, the Bank projected inflation to
decline to 55% by July 2021. Encouragingly, the policies being implemented
by Government and the Bank have managed to anchor inflation expectations
as attested by a significant decline in inflation from 837.5% in July 2020 to
56.4% in July 2021.
73. Reflecting stability in the exchange rate, notable price increases in 2021 have
mainly been recorded in regulated services including electricity, education,
communication, and transport as shown in Figure 12.
Figure 12: Annual Inflation by CPI Category (%)
Source: ZIMSTAT,2021
74. The increase in international oil and food prices also explained the rise in
domestic prices during the period under review. The international prices of
oil and most agriculture products rose by more than 20% since January 2021,
as shown in Figure 13. International crude oil price rose from an average of
US$48.73 per barrel in December 2020 to US$71.80 in June 2021, impacting


negatively on domestic inflation directly and indirectly through increases in
production and distribution costs.
Figure 13: International Oil & Food Price Changes (January to June
2021)
Source: World Bank, 2021
75. Recent empirical evidence shows that global oil and food prices contribute
significantly to domestic inflation in most Sub-Saharan African countries.
The contribution of international commodity price shocks to domestic
inflation is greater for countries that have higher oil intensity and huge food
imports. The recent sharp increase in international food prices has already
slowly started to feed into domestic consumer prices in some regions as
retailers, unable to absorb the rising costs, are passing on the increases to
consumers.
76. International food prices are expected to increase by about 25 percent in
2021 from 2020, before stabilizing in 2022. A pass-through of 20 percent
(13 percent in the first year and 7 percent in the second) would, thus, imply
an increase in consumer food price inflation of about 3.9 percentage points
and 2.1 percentage points on average in 2021 and 2022, respectively for
Zimbabwe. An additional one percentage point to the 2021 global consumer
food inflation could be added by the higher freight rates.

Crude Oil
Maize
Soyabean
Chicken Meat
Sugar
Soyabean
Coffee
Wheat

77. It is in view of these shocks, and in particular the international agriculture
prices, that the Bank continues to be committed to supporting Government
efforts aimed at ensuring food self-sufficiency for all commodities which
can be grown locally including maize, soya-bean and wheat. In this regard,
and despite increases in international prices for most agriculture products
since January 2021, the impact on domestic food prices was largely
neutralized owing to the bumper maize and traditional grains harvest
recorded in 2021.
78. In addition, global inflation had been on a rise since January 2021 as shown
by increases in United States of America (USA), European Union (EU),
England and South Africa among others, bringing to the fore the importance
of foreign inflation spillovers which reflect imported inflation from other
countries to nations with high import requirements such as Zimbabwe.
Annual inflation in USA rose to 5.4% in June 2021 the highest in several
years, while South Africa’s inflation was 5.2% for May 2021, the highest in
30 months.
Figure 14: Global Inflation Trends for Selected Countries (%)
Source: Central Bank Websites
-1

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
US
EU
England
South Africa

79. Despite the exogenous global inflation factors, the Bank, expects month-onmonth inflation which reflects current inflation trends to remain stable at
around 2% during the second half of 2021. Importantly, core inflation which
measures trend inflation by excluding volatile CPI items such as food and fuel
prices stood at 55.8% in July 2021, also pointing to sustainable deceleration
of inflation pressures in the economy.
80. The deviation from the initial end period forecast of just below 10% was due
to unavoidable shocks to international food and administered prices discussed
above. Annual inflation is now expected to fall between 25 and 35% by end
December 2021.
Figure 15: Annual Inflation Outlook (%)
Source: RBZ & ZIMSTAT, 2021
81. The ongoing price and exchange rate stability will go a long way in supporting
industry in making long term investment decisions and allow the efficient

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
RBZ Feb 2021 Original Inflation Forecasts
Revised Inflation Forecasts Policy Scenario
Revised Inflation Forecasts Baseline

allocation of resources. In this regard, the Bank will continue to pursue strong
monetary policies to sustain the current disinflationary path.
SECTION FIVE
BALANCE OF PAYMENTS DEVELOPMENTS AND OUTLOOK
82. Reflective of strong real sector performance, continued monetary restraint and
fiscal consolidation, the country’s external sector position has remained
relatively strong since 2019. A strong external sector position is supportive of
exchange rate stability and hence adds further impetus to the ongoing
disinflation drive.
83.
In addition, Zimbabwe’s strengthening external position derives from the
current recovery in the global economy which is expected to register strong
growth of 6.0% in 2021, from an estimated negative growth rate of 3.2% in
2020.
Table 3:Global Economic Growth Rates & Outlook (%)
Country/Group Name

Estimates
Projections
World Output
-3.2
6.0
4.9
Advanced Economies
-4.6
5.6
4.4
o/w: United States
-3.5
7.0
4.9
Euro-Area
-6.5
4.6
4.3
Japan
-4.7
2.8
3.0
Emerging Market & Developing
Economies
-2.1
6.3
5.2
Asia
-0.9
7.5
6.4
o/w: China
2.3
8.1
5.7
India
-7.3
9.5
8.5
Sub Saharan Africa
-1.8
3.4
4.1
o/w: Nigeria
-1.8
2.5
2.6
South Africa
-7.0
4.0
2.2
*Zimbabwe
-4.1
7.8
5.5
Sources: IMF World Economic Outlook, July 2021

84. The phenomenal recovery in the global economy is simultaneously
strengthening international commodity prices with potentially positive
knock-on effects on Zimbabwe’s export receipts. Figure 16 below shows
commodity prices indices up to June 2021.
Figure 16:International Commodity Price Index
Source: IMF, 2021
85. Reflecting the strong external sector performance, foreign currency receipts
amounted to US$4.02 billion in the first half of the year, compared to
US$3.12 billion received over the same period in 2020, representing a 29.1%
increase in foreign currency supply. Table 4 shows cumulative foreign
currency receipts for six months ended June 2020 and 2021.

2019M07
2019M08
2019M09
2019M10
2019M11
2019M12
2020M01
2020M02
2020M03
2020M04
2020M05
2020M06
2020M07
2020M08
2020M09
2020M10
2020M11
2020M12
2021M01
2021M02
2021M03
2021M04
2021M05
2021M06
Energy
Base Metals
Precious Metals

Table 4: Total Foreign Currency Receipts (US$ millions)
Type of Receipt
June 2021 (US$
Million)
June 2020 (US$
Million)
% Change
Export Proceeds
2,305.70
1,909.1
20.8%
International
Remittances
Diaspora
Remittances
649.47
374.6
73%
NGOs
462.62
331.1
40%
Loan Proceeds
505.15
454.6
11%
Income receipts
79.59
29.9
166%
Foreign Investment
22.35
17.8
25%
TOTAL
4,024.88
3,117.1
29.1%
Source: RBZ
86. The rally in commodity prices, however, brings with it a downside risk
emanating from increasing global energy prices with adverse implications
for the country’s energy import bill. This notwithstanding, the foreign
exchange gains from improved exports are projected to outweigh the
corresponding losses from the incremental energy import bill. This, in effect,
is envisaged to mute the possible negative implications of higher global
petroleum prices on both inflation and external sector resilience.
87. Reflecting this positive global and domestic economic outlook, merchandise
exports are expected to maintain strong growth. The projected export
performance is reflective of the export shipments for the first half of the year.
Precisely, cumulative export receipts as at 30 June 2021 were US$2.31
billion compared to US$1.91 billion received during the same period in
2020. This represents an increase of 20.8% in 2021 shown table 5.

Table 5: Export Receipts by Sector (US$ Millions)
Sector

% Change
Mining
1,902.9
1,380.7
37.8%
Platinum
1,180.9
509.1
132.0%
Gold
309.9
235.0
31.9%
Chrome ore + Ferrochrome
39.4
38.1
3.4%
Diamonds
68.2
17.7
285.3%
Other minerals
304.5
580.8
-47.6%
Manufacturing
71.9
188.5
-61.9%
Tobacco
137.9
145.6
-5.3%
Transport
87.1
96.4
-9.6%
Agriculture
75.9
67.6
12.3%
Horticulture
14.5
12.1
19.8%
Postal & Telecommunications
2.8
6.0
-53.3%
Other Services (Construction, etc)
7.1
8.5
-16.5%
Tourism (Hunting)
5.6
3.7
51.4%
Total
2,305.7
1,909.1
20.8%
Source: RBZ Exchange Control Records
88. Gold exports in 2021 are forecasted to be higher than in 2020 on account of
the recently introduced 2.5 - 5% gold delivery incentive and the COVID 19
induced restriction that could have curtailed gold leakages through
smuggling. There was a remarkable surge in gold deliveries to Fidelity
Printers and Refiners (FPR) in the months of June and July 2021 as shown
in Table 6 and Figure 17. June 2021 gold deliveries to FPR were 2 924.3 kg
compared to 1 409.6 kg delivered in June 2020. Similarly, gold deliveries
for July 2021 stood at 2 824.6 kg compared to July 2020 deliveries of 1 406.4
kg.
89. Small scale gold producers contributed 52.8% of the total gold deliveries to
FPR during the first seven months of 2021 which compares favourably with
the 55.8% delivered for the same period in 2020.

Table 6 Gold Deliveries To Fidelity Gold Refiners (Jan-Jul)
Primary
producers/kg
Small Scale
producers/kg
Total/kg
Jan

642.11
355.52
997.62

734.24
1,813.63
2,547.88
Feb

609.84
560.83
1,170.66

706.74
696.40
1,403.13
Mar

1,139.42
670.07
1,809.49

709.04
1,061.66
1,770.70
Apr

752.32
632.26
1,384.59

735.38
728.92
1,464.30
May

884.20
783.81
1,668.01

806.28
1,209.62
2,015.89
June

1,125.60
1,798.70
2,924.30

870.00
539.58
1,409.58
July

941.11
1,950.31
2,824.62

747.96
658.41
1,406.37
TOTAL

6,094.59
6,854.69
12,779.29

5,309.63
6,708.22
12,017.85
Figure 17: Gold Deliveries to Fidelity Printers and Refiners (January
to July 2021)
Source: Fidelity Printers and Refiners, 2021

January
February
March
April
May
June
July
Primary producers/kg
Small Scale producers/kg
Total/Kg

90. Agricultural exports, led by tobacco, are expected to positively respond to
the favourable climatic conditions during the 2020-2021 agricultural season.
Manufactured exports are similarly expected to rebound, spurred by the
anticipated recovery in production.
91. In tandem with envisaged GDP growth of 7.8% and strengthening global
petroleum prices, merchandise imports are projected to increase by 21.7% to
US$5,743.0 million in 2021, from US$4,719.9 million in 2020. This increase
is projected to be driven by increases in fuel, machinery and raw material
imports. Food imports will, however, be lower than in 2020 on account of
reduced maize imports, following the good 2020/21 agricultural season.
Figure 18: Current Account Developments (US$ millions)
Source: RBZ and ZIMSTAT Estimates
92. As shown in Figure 18, diaspora remittances and other transfers, which
constitute the secondary income account are projected to continue driving
the current account balance as was the case in 2020. Personal transfers from
Zimbabweans in the diaspora are expected to remain steady and resilient, as
the economies in key source markets recover from the Covid-19 induced
slow-down and investments from Zimbabweans in the diaspora rebounds.


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

Table 6 indicates diaspora remittances received through the formal system
for period January – June for the years 2021 and 2020.
Table 7: Inflows of Cash Diaspora Remittances 2021 and 2020
Month
Year 2021
Year 2020
% Change
January
81,915,569
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
122,783,439
85,849,311
43%
Total
649,470,184
374,594,466
73%
Source: RBZ
93. Foreign payments processed by banks on the hand, amounted to US$2.9
billion for the six months ended 30 June 2021, representing a 45.5% increase
from US$2 billion recorded during the same period in 2020 as shown Table
7. Consequently, foreign currency deposits in the banking sector have
increased and now stand at US$1.7 billion.

Table 8: Foreign Payments from January to June 2021 (US$ millions)
Category

%
Variance
Contribution

Contribution

Merchandise Imports (excl.
energy)

Raw Materials &
Intermediate Goods

Capital Goods

Consumption goods

Energy (Fuel & Electricity)

Fuel

Electricity

Service Payments

- Technical, Professional &
consult

Software

Other (tourism, edu, 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: CEBAS System, Exchange Control
94. Taking into account of foreign receipts and payments the current account
balance for 2021 is projected to remain in a surplus position, albeit at a
moderated level of US$611.6 million, compared to US$1,096.3 million
recorded in 2020 as shown in Table 9.

Table 9:Balance of Payments Snapshot (2019-2021 - US$M)

Act.

Act
2021Q1
Act.
2021Q2
Est.
2021Q3
Proj.
2021Q4
Proj.

Proj.
A. Current Account Balance

Trade Balance

Exports

Imports

Balance on Services

Receipts

Payments

Balance on Primary Income

o/w interest payments

Balance on Secondary
Income

o/w Diaspora Remittances

Transfers to NGOs

B. Capital Account Balance

o/w Grants

Direct Investment

Net acquisition of financial
assets

Net incurrence of liabilities

Portfolio Investment

Other Investment

D. Net Errors and Omissions


Source: RBZ

SECTION SIX
MONETARY POLICY MEASURES FOR THE REST OF 2021
95. The obtaining macroeconomic stability, which is expected to continue to be
reinforced by the positive outlook on inflation and the balance of payments
position, requires the Bank to stay the course and maintain its current
monetary policy position which has had positive impact on the economy.
Accordingly, the following measures will anchor the Bank’s monetary
policy stance for the rest of this year:
i.
Interest Rates: The Bank’s overnight accommodation of 40% and the
medium-term lending rate for productive sector of 30% will be
maintained in the short term, in order to control money supply and curb
speculative activities. The Bank shall continue to review the policy rates
in response to the downward inflation trajectory.
ii.
Statutory Reserve Requirements: The 5% statutory reserve
requirement for demand and call deposits and the 2.5% reserve
requirement for time deposits will be maintained in the second half of
the year. This differential reserve requirement system remains necessary
as an incentive structure for banks to promote savings in the economy.
iii.
Reserve Money Target: Quarterly target for the growth of reserve
money for the remaining six months of 2021 remains at 20%. This is
necessary to anchor inflation expectations at sustainable levels through
controlling money supply and to allow for the necessary
accommodation for the growth of the economy.

iv.
Interest Rate Cap: A cap on the interest rate at which banks can onlend the proceeds from the Medium- term Lending Facility is also
maintained at 10% above the borrowing rate to ensure recovery of the
productive sectors of the economy.
v.
Accumulation of Foreign Exchange Reserves: The Bank will start to
set aside foreign exchange resources to build the country’s foreign
exchange reserves to anchor exchange rate stability and to cope with
transitory exchange rate shocks in the national economy.
vi.
Addressing Foreign Exchange Auction Allotment Backlog: The
Bank has put in place the following measures to deal with the residual
foreign exchange auction allotment backlog:
a. Utilisation of the existing letters of credit facilities for the
importation of strategic commodities and capital goods in order to
lessen the demand on the Foreign Exchange Auction System;
b. Supporting banks to promote financial intermediation to leverage on
the current long foreign exchange position of around US$1.7 billion
in the banking system; and
c. Working closely with Government to ensure that some of the foreign
exchange balances in the Exchequer Account are utilised to expunge
the backlog.
vii.
Addressing the Gap Between the Official and Parallel Exchange
Rates: The Bank is addressing the gap between the official and parallel
exchange rates through tightening money supply, expunging the foreign
exchange allotment backlog, increasing the attractiveness of the local
currency so that the local currency complements rather than competes
with the USD, discouraging rent-seeking behaviour and promote

sustainable behaviour and fair play in the foreign exchange market and
provision of forward guidance to anchor exchange rate expectations and
enhance business sentiment.

viii.
Continuation of the Foreign Exchange Auction System: The Bank
is satisfied with the achievements of the Foreign Exchange Auction
System which have had a significant impact on the economy over the
year it has been in operation. The Bank is thus continuing with the
Foreign Exchange Auction System and is determined to strengthen the
system to ensure that it reflects economic and market fundamentals of
supply and demand.

The auction system is open to everyone for legitimate foreign exchange
transactions through the bidding process. Bids are submitted through
banks by individuals and entities that require foreign currency. It is a
transparent system and the Bank is only administrator of the system and
does not manipulate the auction system, neither does it participate on
the foreign exchange parallel market.

The Bank shall therefore continue to foster compliance and enhance
monitoring of the Foreign Exchange Auction System. As a public
institution, the Bank shall also maintain its stance to enhance
transparency and accountability in the operation of the Foreign
Exchange Auction System.

ix.
Enhancing Financial Inclusion: The Bank is enhancing financial
inclusion which is critical for inclusive growth through the development
of the National Financial Inclusion Strategy Phase 2 (NFIS 2) for 20212025. The NFIS 2 will seek to address the challenges and gaps noted in

the NFIS 1, with more focus on usage, digital financial services, quality
of financial services, fintech & product innovation, financial inclusion
data disaggregation and sustainability.
SECTION SEVEN
DISPOSAL OF BANK ASSETS
96. The Bank has been able to achieve its goal to dispose of two of its assets,
Tuli Coal (Private) Limited and Transload Enterprises (Private) Limited (the
jatropha/bio-diesel plant), to Government through the Ministry of Finance
and Economic Development and the Ministry of High and Tertiary
Education, Innovation, Science and Technology Development, respectively.
97. The Bank is nearing the final stages of the partial privatisation of FPR
through offering 60% of its shareholding in the gold refinery business to
producers of gold. The Bank will retain 40% in the gold refining company
and 100% in the printing, minting and gold financing business.
98. It is expected that the unbundling process of FPR will be completed in 6
months’ time given the need to ensure transparency, adhere to international
best practice and to provide ample time to would-be new shareholders to
complete the necessary due diligence.
ACQUISITION OF SHAREHOLDING IN ZIMSWITCH
99. The Bank is proceeding to acquire 15% shareholding in Zimswitch
Technologies (Private) Limited in order to spearhead interoperability of
infrastructure and connection protocols of mobile money transmission
providers and mobile banking providers through the national payment

switch and enhance monitoring and surveillance of the financial system in
Zimbabwe.
SECTION EIGHT
CONCLUSION
100. The economy is rebounding on account of the stable macroeconomic
conditions. Both the external and real sectors of the economy are expected
to remain strong in the outlook period. We, therefore, need to stay the course
and consolidate the current economic policy measures for stability and
sustainable growth of the economy.
101. The expected positive growth of the world economy, supported by stimulus
packages in the developed countries and Asia and from the IMF will buttress
Zimbabwe’s economic growth trajectory. In addition, the expected increase
in commodity prices on account of increased global demand will enhance
the country’s export performance, notwithstanding the expected rise in
global inflation which will have moderate pass-through effects to domestic
inflation.
102. The Government has put in place elaborate measures to deal with the Covid19 pandemic including the vaccination programme, which is one of the best
in Africa. Thus whilst the economic outlook is positive, concerted efforts to
continue mitigating the negative effects of the Covid-19 pandemic on the
economy remain paramount to maintain the current positive economic
trajectory.
103. Overall, the economy is on the right track. It is rebounding. The outlook is
positive on account of the remarkable hawkish monetary policy stance being

pursued by the Bank, Government’s strong fiscal sustainability and the
positive global financial developments. This stable and positive
macroeconomic environment points to the need for the Bank to continue
with its current monetary policy stance to support the robust economic
growth of at least 7.8% in 2021, while continuing to reduce annual inflation
to the desired level of around 30% by the end of December 2021.
I THANK YOU
MAY GOD BLESS YOU ALL
MAY GOD BLESS ZIMBABWE
JOHN PANONETSA MANGUDYA
GOVERNOR