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STAYING THE COURSE TO PRICE STABILITY
9 AUGUST 2023
MID-TERM MONETARY POLICY STATEMENT
By
JOHN PANONETSA MANGUDYA
GOVERNOR

TABLE OF CONTENTS
SECTION FOUR: CONDITION AND PERFORMANCE OF THE BANKING SECTOR .. 27

TABLE OF FIGURES
Figure 2:Exchange Rate Premium (%) Official versus Parallel Market Exchange rate
Figure 25: Digital Payments Transaction Values and Volumes from Jan-June 2023 .. 50

LIST OF TABLES

SECTION ONE: INTRODUCTION AND BACKGROUND
1.
This Mid-Term Monetary Policy Review Statement (the Statement) is issued at a
time when the economy is on the right track toward sustained price and exchange
rate stability. The measures in this Statement are, therefore, primarily aimed at
ensuring that the country stays on course or continues to hold on to the right path
of the progress that it has attained on the price and financial stability fronts.
Precisely, the Statement, which is issued in terms of Section 46 of the Reserve
Bank Act [Chapter 22:15], will evaluate the monetary policy stance and policies
pursued by the Bank in the past six months ended 30 June 2023 and outline the
monetary policy stance to be pursued by the Bank in the next six months.

2.
The country experienced significant exchange rate depreciation between April and
June 2023 driven by both demand and supply factors, which exerted significant
pass-through to inflation. The demand factors mainly reflected elevated demand
for foreign currency for store-of-value purposes. The effect of the high demand
for foreign currency on the economy was coupled with the sudden decline in the
demand for local currency due to speculative behaviour, including exchange rate
indexation at excessively undervalued or over-depreciated exchange rates. In
addition, supply factors emanating from a transitory decline in foreign currency
receipts on account of declining export commodity prices such as the Platinum
Group of Metals (PGMs). The adverse supply trends have, however, since
reversed.

3.
The bold policy intervention measures instituted by the Government and Bank for
tackling the transitory price and exchange rate volatility have gone a long way in
arresting the instabilities and bringing the much-needed normalcy in the price and
exchange rate dynamics and calmness in domestic markets. This normalcy will be
critical to anchor the robust economic growth projected at 5.3% in 2023, supported
by a good performance by the agriculture and mining sectors, recovery in tourism
and expected improvements in electricity generation in the second half of the year.

4.
The country’s macroeconomic fundamentals have remained strong to support and
sustain the current price and exchange rate stability as attested by the continued
favourable balance of payments, low growth in money supply, and a safe and
sound banking sector. Precisely, the country’s balance of payments current
account has been in a surplus position since 2019 and is projected to close the year
2023 with a surplus of US$274.5 million. On the monetary front, money supply
growth has been under control as evidenced by the slow growth in local currency
lending since January 2023.

5.
Similarly, the financial sector has remained safe and sound with adequately
capitalised institutions that can underwrite lending to support the growth
trajectory. The strong monetary and financial position has been corroborated by
sustained fiscal stability where the Government continues to manage its fiscal
position within internationally acceptable ranges of fiscal deficits of below 3%.

6.
The strong macroeconomic fundamentals obtaining in the economy suggest that
the exchange rate instability witnessed between May and June 2023 was not a
result of monetary factors but a reflection of adverse behavioural factors and
insatiable demand for foreign currency by economic agents. The measures
instituted by the Bank, which include further liberalisation of the exchange rate,
tighter monetary policy and the introduction of gold coins and gold-backed digital
tokens are bearing fruit as evidenced by the current firming and relatively stable
exchange rate dynamics.

7.
The ongoing intervention in the foreign exchange market through the wholesale
auction system is exerting a dual effect of mopping up excess liquidity and reestablishing the optimal mix of the dual currencies, thus sustaining the current
exchange rate and price stability. As a result of the adroit policy measures, the
country witnessed a significant correction in the exchange rate which had overshot

its equilibrium. The correction in the exchange rate has led to a concomitant
correction in prices.

8.
As a result, the steep increase in month-on-month inflation from 15.7% in May to
74.5% in June 2023, significantly reversed in July 2023 to minus 15.3%. Similarly,
the annual inflation which had risen from 86.5% in May 2023 to 175.8% in June
2023, fell to 101.3% in July 2023.

9.
The Bank remains confident that the continued sale of gold coins and gold-backed
digital tokens will sustainably take away steam from the store-of-value demand
for local currency during the short to medium term, with positive spinoffs on the
substance of the obtaining price and exchange rate stability. Furthermore, the
Bank’s strategic resolve for continued monetary prudence will add further impetus
to the positive prospects of the local currency over the medium term. In addition,
the ongoing monitoring and surveillance by the Financial Intelligence Unit (FIU)
will effectively minimise incidences of exchange rate manipulation and abnormal
pricing practices.

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 covers Balance of Payments developments and
outlook, Section six provides the new monetary policy stance for the next six
months, Section seven outlines the economic and inflation outlook and lastly
Section eight concludes the Statement.

SECTION TWO: ASSESSMENT OF PREVIOUS MONETARY POLICY

11. The Monetary Policy measures announced in February 2023 have gone a long way
to foster stability in the economy as reflected by the sustained decline in annual
inflation from 101.5% in January to 75.2% in April 2023. The economy, however,
saw a re-emergence of inflationary pressures in the economy during the second
quarter of 2023, mainly driven by exchange rate depreciation. The exchange rate
depreciated on account of a temporal foreign currency shortages as commodity
prices declined, while the demand for foreign currency for store-of-value purposes
increased.

12. In view of the above, a combination of supply and demand management policy
measures instituted by Government and the Bank, coupled with market discipline
measures instituted by the FIU were critical to stabilise the market and foster
confidence in the economy.

Money Market Liquidity
13. The tight monetary policy stance adopted by the Bank was maintained throughout
the first half of 2023. The Bank continued to mop up excess liquidity from the
market through the issuance of Non-Negotiable Certificates of Deposit (NNCDs).
In this regard, the outstanding NNCDs as of 14 July 2023 amounted to ZW$163.5
billion.

Lender of Last Resort Facility
14. The month of June 2023 saw significant depreciation of the exchange rate which
coincided with the second Quarterly Payment Date (QPD) for corporate taxes.
Significant liquidity was withdrawn from the market through the QPD and most
banks saw their liquidity levels dwindling resulting in three banks approaching the
Bank for support through the lender of last resort (LOLR) facility. The outstanding
amount under the LOLR facility was ZW$32.5 billion as of 14 July 2023.

Bank Policy Rates
15. The Bank policy rate which had been pegged at 150% per annum since February
2023, was reviewed downwards by the Monetary Policy Committee (MPC) to
140% effective 1st April 2023, in line with the downward trend in annual inflation.
However, the re-emergence of exchange rate volatility witnessed from mid-April
2023, reversed the downward inflation trajectory thus compelling the MPC to
review the Bank policy rate upwards, from 140% to the current level of 150% per
annum.

16. The increase in the policy rate was moderate as the Bank noted that exchange rate
depreciation and inflation pressures were not emanating from increased money
supply due to borrowing for speculative purposes. As shown in Figure 1, the
exchange rate depreciation witnessed in May 2023 was de-linked from
developments in the money-supply growth nexus.

Figure 1:Annual M3 Growth (ZWL Component) Vs ZWL Depreciation (%)


Medium-Term Bank Accommodation Facility (MBA)
17. The MBA which was introduced in 2019 has immensely supported the productive
sectors of the economy. The outstanding balance as of 14 July 2023 was ZW$36.5
billion. The MBA rate has been adjusted in tandem with the benchmark Bank
policy rate in response to inflation developments. As such, the lending rate for
MBA Facility for the productive sectors, including individuals and MSMEs is
currently at 75% while the Bank policy rate is at 150% after the upward
adjustments of interest rates on 6 June 2023 following the resurgence of inflation
pressures in the economy.

18. The continued alignment of the MBA rate with the policy rate is important to curb
arbitrage borrowing opportunities from the window. The Bank continues to
monitor the MBA window to ensure that it is not used for speculative purposes.


Micro, Small, and Medium Enterprises (MSMEs) Facility
19. To avert the collapse of the MSME sector, which was adversely affected by the
Covid-19 pandemic, the Bank introduced the MSME facility. This intervention,

Jan-22
Feb-22
Mar-22
Apr-22
May-22
Jun-22
Jul-22
Aug-22
Sep-22
Oct-22
Nov-22
Dec-22
Jan-23
Feb-23
Mar-23
Apr-23
May-23
Annual Growth in Money Supply
Annual Depreciation

which is availed to the MSME sector through banks is offered at 75%. The
outstanding amount under this facility was ZW$2.1 billion as at 14 July 2023.

Deposit Interest Rates
20. Consistent with the expected inflation profile, savings and time deposit rates in
local currency was reduced from 40% and 80% per annum to 30% and 50%,
respectively on 1 February 2023. The Bank maintained the minimum deposit rates
on savings and time deposits at 30% and 50% per annum, respectively since 1
February 2023. This is critical to support the savings culture in the country.

Statutory Reserves
21. The Monetary Policy Committee (MPC) reviewed upwards the statutory reserve
requirements on local currency deposits, with effect from 7 June 2023. Statutory
reserve requirements for local currency demand and call deposits were increased
from 10% to 15%, while savings and time deposits were maintained at 5%. The
statutory reserve balances increased from ZW$109 billion on 1 June 2023 to
ZW$197.28 billion as of 14 July 2023 partly due to the policy change as well as
the increase in the local currency deposit base, emanating from FX purchases.

22. Foreign currency statutory reserve requirements for demand and call deposits were
maintained at 10%, while savings and time deposits were maintained at 5%.
Reflecting increased deposits in foreign currency accounts, foreign currency
statutory reserve balances increased from US$70.34 million on 6 June 2023 to
US$158.82 million as of 14 July 2023.

Gold Coins and Gold-Backed Digital Tokens
23. The gold coins, which were introduced as an alternative store of value, continued
to be a critical monetary policy instrument, mopping up over ZW$35 billion from
a total of 36,059 coins as of 14 July 2023. The first maturity after the 180 days
vesting period was 25 January 2023 and only 769 gold coins (2% of the total sold)
have been redeemed so far, bearing testimony that it is indeed considered a storeof-value.

24. To complement the sale of physical gold coins and expand the value-preserving
instruments available in the economy, enhance the divisibility of the investment
instruments and widen their access and usage by the public, the Bank introduced
Gold-Backed Digital Tokens (GBDT) on 12 May 2023. The GBDT is fully backed
by physical gold held by the Bank.

25. As at 21 July 2023, the Bank had conducted 11 issuances of GBDT, receiving a
total of 590 applications to purchase tokens valued at ZW$50.50 billion and
US$7,794.87. The Bank, therefore, issued 325,024,524 milligrams equivalent to
325.02 kgs of gold.

Foreign Exchange Market
26. The Bank continued to enhance the efficiency and operations of the foreign
exchange market by strengthening the Willing-Buyer Willing-Seller trading
arrangement. The introduction of the wholesale foreign exchange auction to
address the supply side in the interbank foreign exchange market on the back of
the recent liberalization of the exchange rate has seen the parallel market exchange
rate premium declining significantly from more than 100% during May 2023 to
below 20% and this is expected to narrow further as the parallel market exchange
rate appreciates.

27. These interventions in the foreign exchange market supported by tight monetary
policy, have resulted in the elimination of foreign exchange distortions and
arbitrage opportunities in the economy. The local currency has as a result begun
appreciating against the US dollar since mid-June 2023, as the market corrects
towards the market clearing equilibrium. The ZW$/US$ exchange rate gained
from ZW$6,926.58 as at 21 June 2023 to ZW$4,771.38 as at 19 July 2023. Figure
2 shows developments in the foreign exchange market for the period from
September 2021 to July 2023.

Figure 2:Exchange Rate Premium (%) Official versus Parallel Market
Exchange rate May 2023 to Aug 2023

Source: RBZ and Market Intelligence Surveys, 2023

28. In the short term, the Bank will continue implementing tight monetary policy
measures to ensure the parallel market premiums remain at acceptable
international levels of less than 20%.


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Foreign Currency Auction
29. During the first seven months of 2023, the Bank allotted a total of US$382.93
million through the Retail Auction System, representing 69.45% of total bids
submitted. Since inception of the Auction System in June 2020, a total of US$4.09
billion has been allotted, representing 85% of the total bids submitted.

Table 1: Foreign Exchange Auctions Data as of 21 July 2023
Date
US$ Total Bids
US$ Allotted
Share of Allotted
2020 total
645,295,466.94
624,933,976.75
96.80%
2021 total
2,031,648,018.52
1,971,446,836.20
97.00%
2022 total
1,220,873,179.99
1,114,154,170.50
91.30%
Jan-23
82,345,695.49
57,686,081.37
70.10%
Feb-23
82,352,443.87
76,616,769.35
93.00%
Mar-23
77,699,985.11
76,714,051.24
98.70%
Apr-23
85,184,767.82
81,185,667.39
95.30%
May-23
186,235,738.62
79,280,528.30
42.60%
Jun-23
35,809,997.09
9,865,704.61
27.60%
Jul-23
1,743,257.84
1,583,532.52
91%
Total 2023
551,371,885.84
382,932,334.78
69.45%
Grand Total
4,449,188,551.29
4,093,467,318.23
92.00%

30. With effect from 13 June 2023, the Main and SME Auctions were merged into one
Retail Auction with a maximum amount of US$5 million per week. The minimum
bid for the Retail Auction is US$1,500 and the maximum is US$50,000.

Wholesale Foreign Currency Auction
31. On 7 June 2023, the Bank further liberalised the foreign exchange market and
introduced the Wholesale Foreign Exchange Auction in a bid to strengthen the
interbank foreign exchange market under the Willing-Buyer Willing-Seller
(WBWS) arrangement. Under this arrangement, the Bank auctions foreign
exchange to Authorised Dealers at market-determined exchange rates for them to
onward sell to their customers.

32. Since inception, the Bank has held 12 wholesale auctions, with banks submitting
bids of around 32% of the amount on offer, largely due to the tight local currency
liquidity conditions prevailing in the market.

Table 2: Wholesale FX Auction Results - 20 July 2023
Date
Bids
Weighted
Auction
Rate (AR)
US$ Total
Bids
US$ Allotted
Share of
Allotted
7-Jun-23


13-Jun-23


16-Jun-23


20-Jun-23


27-Jun-23


29-Jun-23


4-Jul-23


6-Jul-23


11-Jul-23


14-Jul-23


18-Jul-23


20-Jul-23


Total

105,272,954.00 95,845,000.00
91%

33. The Bank has allotted US$95.85 million under the Wholesale Foreign Exchange
Auction, representing 91% of the total bids submitted. On average 12 bids were
received per auction, with bids that were way below the market rates, not allotted
as they presented arbitrage threats.

34. The Wholesale Foreign Exchange Auction System has strengthened the interbank
foreign exchange market under the Willing-Buyer Willing-Seller (WBWS) and
remained central to the determination of the market exchange rate.

Willing-Buyer Willing-Seller Market
35. To complement the Wholesale Foreign Exchange Auction, banks have also been
buying foreign currency from the market for trading on the Interbank Foreign
Exchange Market. Cumulative purchases and sales on the Willing-buyer Willingseller market in 2023 were US$112.57 million and US$107.19 million,
respectively.

Figure 3: Interbank Market Activity


12 April – 31 Dec 2022
Jan to 6 June 2023
7 June – 19 July 2023
US$ Millions
Period
Purchases by banks from customers
Sales by banks to customers
Sales to RBZ

Bureaux de Change
36. As from 2 January 2023 to 30 June 2023 a cumulative total of US$10.5 million
was traded through the Bureaux de Change, as shown in Table 3.

Table 3: Trading by Bureaux De Change: 02 Jan to 30 June 2023
DESCRIPTION
AMOUNT (US$)
%
CONTRIBUTION
PERSONAL TRAVEL ALLOWANCE 4,613,812
44%
DOMESTIC UTILIZATION
4,450,844
43%
EDUCATION
490,538
5%
BUSINESS TRAVEL ALLOWANCE 385,301
4%
INVENTORY
208,530
2%
SOCIAL WELFARE
109,521
1%
SUBSCRIPTIONS
77,995
1%
SPARES & MACHINERY
38,347
0%
MEDICAL
31,229
0%
AIR FARES
14,563
0%
RAW MATERIALS
19,116
0%
SOFTWARES
15,914
0%
OTHER
2,930
0%
PENSION

0%
TOTAL
10,458,860.84
100%

Foreign Currency Receipts
37. The positive trajectory in foreign currency receipts continued during the first half
of 2023, with total receipts increasing by 3.5% to US$ 5.595 billion compared to
US$ 5.405 billion during the comparable period in 2022. The increase in foreign
currency receipts was driven by exports (55%) and diaspora remittances (16%), as
shown in Table 4.

Table 4: Total Foreign Currency Receipts as at 30 June 2023 (US$ Millions)
Type of Receipt

% Change


Amount
(US$
Millions)
%
Contribution
Amount
(US$
Millions)
%
Contribution
Export
Proceeds


International
Remittances
Diaspora
Remittances

16%

15%
15.3%
NGOs

9%

11%
-10.5%
Loan
Proceeds

16%

8%
114.6%
Income
receipts

1%

2%
-23.7%
Foreign
Investment

2%

2%
22.1%
TOTAL


Source: RBZ 2023

SECTION THREE: RECENT ECONOMIC AND INFLATION
DEVELOPMENTS

38. Reflecting waning global economic growth prospects, the IMF’s World Economic
Outlook July 2023 is now forecasting a GDP decline from 3.5 % in 2022 to 3.0 %
in 2023. The decline would be mainly driven by advanced economies whose
growth is expected to fall from 2.7 % in 2022 to 1.5 percent in 2023. Global
headline inflation is, however, expected to start to moderate from 8.7% in 2022 to
6.8% in 2023, benefiting from lower commodity prices, particularly oil.

39. Despite the recent volatility in the exchange rate, the domestic economic prospects
remain robust with economic growth projected at 5.3% in 2023, up from the initial
forecast of 3.8%. This growth is on account of better performance by agriculture,
mining, ICT and tourism, supported by expected improvements in electricity
generation in the second half of the year.

40. The strong growth in the agricultural sector is driven mainly by projected growth
in maize, tobacco, wheat, and cotton. Maize output is expected to be more than 2
million tonnes in 2023, up from 1.5 million tonnes in 2022. Tobacco output
reached a record high of 295 million kilograms in 2023.

41. The mining sector also continues to support growth, benefiting largely from
ongoing investments in lithium production, following a rise in global demand for
the manufacture of batteries for electrical vehicles.

42. Gold deliveries that had been affected by incessant rains, particularly for smallscale and artisanal miners, during the beginning of the year have shown significant
improvement. Cumulative gold deliveries stood at 14 181 kg by June 2023, as
shown in Table 5.

Table 5: Gold Deliveries for 2023

Jan
Feb
Mar
Apr
May
Jun
Total
Primary
Producers
(Kg)

1,070

1,033

5,520
Small Scale
Producers
(Kg)

1,139

1,579

1,473

1,806

1,702

8,661
Total (Kg)

1,896

1,895

2,403

2,377

2,876

2,735

14,181
Average price
(USD/Oz)

1,899

1,855

1,913

1,974

1,993

1,944

1,910
Source: Fidelity Gold Refineries, 2023

INFLATION DEVELOPMENTS
43. Inflation maintained a downward trend declining from 101.5% in December 2022
to 75.2% in April 2023, on account of tight monetary conditions. Inflationary
pressures, however, re-emerged from April to June 2023, driven mainly by
exchange rate depreciation. Accordingly, inflation increased to 86.5% and 175.8%
in May and June 2023. Similarly, monthly inflation which was stable since the
beginning of the year rose in May to 15.7% and peaked at 74.5% in June 2023.

44. Inflationary pressures, however, dissipated following the recent bold measures put
in place by Government and the Bank, which included the liberalisation of the
exchange rate supported by the takeover of the Bank's external liabilities and the
requirement for duties and taxes to be paid in local currency which increased the
demand for the local currency. As a result of the appreciating exchange rate,
monthly inflation declined from the peak of 74.5% in June 2023 to minus 15.3%
in July 2023 as shown in Figure 4.

Figure 4: Monthly Inflation Developments (%)

Source: ZIMSTAT, 2023


45. Similarly, annual inflation which rose sharply in June 2023 to 175.8% reversed
sharply to 101.3% in July 2023 and is expected to progressively decline in the near
term as the measures took full effect.

Figure 5: Annual Inflation Developments

Source: ZIMSTAT, 2023


M-O-M (%)
M-O-M Inflation Rate (%)

All Items
Food and non alcoholic beverages
Non food

RESERVE MONEY DEVELOPMENTS

46. Reserve money stock stood at ZW$1 064.89 billion in June 2023, compared to
ZW$104.04 billion recorded in December 2022. The increase was largely due to real
growth in foreign currency statutory reserves as well as valuation changes associated
with exchange rate depreciation. Of the 923.51% growth in reserve money for the
period December 2022 to June 2023, 764.06% was attributed to valuation changes.
The inter-bank exchange rate moved from ZW$684.3339 per US$1 as at the end of
December 2022 to ZW$5 739.80 per US$1 as at the end of June 2023.

47. In US dollar terms, the value of foreign currency-denominated statutory reserves
increased from US$66.19 million in December 2022 to US$157.25 million in June
2023. The local currency statutory reserves increased from ZW$58.75 billion in
December 2022 to ZW$182.61 billion in June 2023. As a result, total statutory
reserves (local and foreign currency components), constituted 99.02% of total
reserve money, as shown in Figure 6.

Figure 6: Components of Reserve money as at the of end June 2023

Source: Reserve Bank of Zimbabwe, 2023
Currency Issued
0.97%
RTGS Balances
0.01%
ZWL Statutory
Reserves
17.15%
Foreign Currency
Stats Reserves
81.87%

BROAD MONEY DEVELOPMENTS

48. Broad money (M3) amounted to ZW$14 275.48 billion as at the end of June 2023,
compared to ZW$2 338.23 billion recorded in December 2022. The increase largely
reflected an expansion of ZW$10 977.60 billion in foreign currency accounts
deposits, reflecting exchange rate movement.

49. Foreign currency deposits constituted 81.51% of total money supply as of June 2023,
while local currency deposits accounted for 18.43%, and currency in circulation,
0.06%. Figure 7 shows monetary developments for the period December 2021 to
June 2023.

Figure 7: Monetary Developments (ZW$ Billion)

Source: Reserve Bank of Zimbabwe, 2023

50. On an annual basis, broad money grew by 1 174.94% in June 2023, largely reflecting
exchange rate movements. As such, the increase in foreign currency accounted for
980.36 percentage points of the 1 174.94% annual increase in money supply. Local
currency deposits contributed 194.19 percentage points to the annual increase in
broad money (M3).
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Figure 8: Contributions to Money Supply Growth (%)

Source: Reserve Bank of Zimbabwe, 2023

STOCK MARKET DEVELOPMENTS
51. During the first half of the year 2023, the Zimbabwe Stock Exchange (ZSE) was
largely characterized by high speculative tendencies as investors sought safe haven
in some selected stocks with strong balance sheets, in line with limited investment
options on the money market. Consequently, all the major indices registered gains,
with the ZSE All Share, Top 10, Medium Cap and Small Cap indices adding
779.30%, 655.69%, 1 090.87% and 322.81% to close at 171 408.90 points, 93
034.57 points, 436 363.92 points and 1 911 327.14 points, from 19 493.85 points,
12 311.13 points, 36 642.44 points and 452 056.95 points recorded as at end of
December 2022, respectively.

52. In the same vein, the resource index increased by 106% to close at 76 960.49
points, compared to 25 487.77 points recorded as at the end of 2022. On a yearon-year basis, the ZSE All Share, Top 10 and Mining Indices gained 766.05%,
658% and 284.39%, from 19 791.94 points, 12 273.75 points and 20 021.24 points
-200

Claims on Private Sector
Net Claims on Gvt
Claims on Other Sectors
Residual of NFA and OIN
Annual Growth

recorded in June 2022, respectively. Figure 9 shows developments of the ZSE All
Share, Top 10 and mining indices for the period June 2022 to June 2023.

Figure 9: ZSE All Share, Top 10 and Mining Indices
Source: Zimbabwe Stock Exchange, 2023

Victoria Falls Stock Exchange (VFEX)
53. The Victoria Falls Stock Exchange (VFEX) was characterized by bearish
sentiments during the period under analysis. As a result, the VFEX All Share index
declined by 30.56% to close the second half of 2023 at 76.17 points, from 109.69
points recorded in December 2022. On an annual basis, the VFEX All Share index
lost 33.99%, from 115.39 points recorded in June last year.


All Share Index
Top 10 Index
Mining Index

Figure 10: Victoria Falls Stock Exchange All Share Index

Source: Victoria Falls Stock Exchange, 2023

Market Capitalization
54. Despite the bearish sentiments that characterized the VFEX during the first half of
2023, market capitalization rose by 202.51% to US$1.29 billion, compared to
US$424.83 million recorded in December 2022. The increase in VFEX
capitalization was largely attributed to a notable number of new listings, beginning
in the year 2023. This culminated in an increase in the number of outstanding
issued shares on the VFEX market.


SECTION FOUR: CONDITION AND PERFORMANCE OF THE BANKING
SECTOR

55. The banking sector continued to demonstrate resilience on the back of a broad
range of complementary fiscal and monetary stabilisation measures, to foster and
enhance price and financial stability. Banking institutions continue to adapt to the
dynamic operating environment by reconfiguring their business models, including
the digitisation of banking services. This has gone a long way in providing
convenient and modern banking services to the banking public, as well as fostering
inclusivity. The architecture of the banking sector is shown in Table 6.

Table 6 Banking Sector Architecture
Type of Institution
Number
Commercial Banks

Building Societies

Savings Bank (POSB)

Total Banking Institutions

Other Financial Institutions Under the Supervision of Reserve Bank
Credit-only-MFIs

Deposit-taking MFIs

Development Financial Institutions (SMEDCO, IDBZ, IDCZ and
AFC Land & Development Bank)

Total Other Institutions

Total Number of Institutions

Financial Soundness Indicators
56. Banking sector performance remained satisfactory, as reflected by adequate
capitalisation, strong asset quality, adequate liquidity and sustained profitability,
among other key financial soundness metrics as depicted in Table 7.

Table 7: Financial Soundness Indicators
Key Indicators
Benchmark
Jun-22
Sep-22
Dec-22
Mar-23
Jun-23
Total Assets ($tn)

Total Loans &
Advances ($tn)

Net Capital Base
($tn)

Core Capital ($tn)

Total Deposits
($tn)

Net Profit ($tn)

Return on Assets

Return on Equity

Capital Adequacy
Ratio

Tier 1 Ratio

Loans to Deposits
Ratio

NPLs Ratio

Liquidity Ratio


Banking Sector Capitalization
57. As at 30 June 2023, the banking sector was adequately capitalized and all banking
institutions were in compliance with the prescribed tier 1 and minimum capital
adequacy ratios of 8% and 12%, respectively. The average capital adequacy and
tier 1 ratios were 40.48% and 35.35%, respectively.

58. Aggregate core capital increased from $611.11 billion as at 31 December 2022 to
$5.05 trillion as at 30 June 2023. The growth in core capital was mainly attributed
to capitalisation of retained earnings. The retained earnings for some banking
institutions are largely composed of revaluation gains from investment properties
and translation gains from foreign exchange-denominated assets.

59. As at 30 June 2023, fifteen (15) out of 18 banking institutions (excluding POSB)
reported core capital levels that was above the minimum capital requirements as
shown in Table 8.

Table 8: Banking Sector Capitalisation Levels
Institution
Reported
Core
Capital as at 30
June 2023 (ZW$)
Reported
Core Capital
30 June 2023
Capital
Adequacy
Ratio
(CAR).
(Min 12%)
Compliance Status
** (US$)
COMMERCIAL BANKS
AFC Commercial
Bank
228,481,595,385.56
39,806,570.03
37.17% Compliant
BancABC
185,557,005,916.16
32,328,152.90
20.86% Compliant
First Capital Bank 195,409,479,574.26
34,044,672.70
27.48% Compliant
CBZ Bank
457,094,633,576.87
79,636,040.31
20.58% Compliant
Ecobank
320,360,900,889.71
55,813,986.30
35.85% Compliant
FBC Bank
324,467,654,842.01
56,529,474.08
20.49% Compliant
Nedbank
235,164,498,779.95
40,970,880.27
46.40% Compliant
Metbank
665,123,169,344.68 115,879,232.95
78.11% Compliant
NMB Bank
266,130,254,841.21
46,365,802.93
27.87% Compliant
Stanbic Bank
551,853,335,593.19
96,145,111.43
24.31% Compliant
Standard
Chartered Bank
114,412,040,320.69
19,933,119.28
43.58%
Compliant on CAR and
Non-Compliant with the
prescribed minimum core
capital
Steward Bank
217,816,814,889.39
37,948,528.33
50.35% Compliant
Time Bank
3,197,923,519.16
557,149.32
65.24%
Compliant on CAR and
Non-Compliant with the
prescribed minimum core
capital
ZB Bank
348,682,807,786.56
60,748,291.70
22.16% Compliant
BUILDING SOCIETIES
CABS
566,087,904,508.32
98,625,089.58
44.17% Compliant
FBC Building
Society
140,056,441,210.69
24,400,943.65
41.67% Compliant
National Building
Society
123,871,993,860.57
21,581,253.36
24.55% Compliant
ZB Building
Society
25,821,970,809.20
4,498,760.99
46.36%
Compliant on CAR and
Non-Compliant with the
prescribed minimum core
capital
SAVINGS BANK
POSB
79,337,623,371.34
13,822,376.61
40.19% No prescribed minimum
capital requirement
* The prescribed minimum capital requirements is ZW$ equivalent to US$30 million for
Tier I banking institutions and US$20 million for Tier II banking institutions including
building societies.
** Willing buyer willing seller exchange rate (US$1: 5,739.7961) as at 30 June 2023

60. Standard Chartered Bank’s compliance will be addressed through the acquisition
of the banking institution by FBC Holdings Limited (FBCH), which is currently
being finalised.

61. ZB Building Society capitalisation is also dependent on the outcome of the current
strategic initiatives within the Group.

62. In line with the approval to recommence banking business, Time Bank was
permitted to gradually meet the prescribed minimum capital requirements in terms
of its strategy which provides for a phased approach to conduct banking activities.

63. As previously communicated, the deadline for compliance with the minimum
capital requirements by non-compliant banks was extended by a further 12 months
to 31 December 2023, to allow for the completion of the recapitalisation
processes.

64. Banking institutions are employing a number of capital preservation strategies,
which include investing in gold coins and investment properties, lending in US$,
as well as maintaining a portion of their capital in US$.

65. The Bank continues to monitor capitalisation of banking institutions, given that a
well-capitalised banking sector is an engine for sustainable economic growth and
development

Banking Sector Asset Structure
66. Total banking sector assets increased from $3.81 trillion as at 31 December 2022
to $27.28 trillion as at 30 June 2023 as shown in Figure 11.

Figure 11: Digital: Asset Mix as at 30 June 2023


Banking Sector Loans and Advances
67. Aggregate banking sector loans and advances increased by 7.9 times from $1.29
trillion as at 31 December 2022 to $10.19 trillion as at 30 June 2023. The increase
was largely attributed to an increase in foreign currency-denominated loans, which
constituted 94% of the sector’s loan book.

68. Total loans to total deposit ratio for the banking sector remained relatively stable
at 55% as at 30 June 2023 from 55.67% at the end of 2022. The foreign currency
loans to foreign currency deposits ratio was 60% during the same period.

69. The banking institutions continued to contribute to economic recovery and growth
by channelling resources to the productive sectors of the economy. The loans to
the productive sectors constituted 77.67% of total loans as at 30 June 2023. Figure
12 shows the sectoral distribution as at 30 June 2023.

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Figure 12: Sectoral Distribution of Loans as at 30 June 2023

Source: Reserve Bank of Zimbabwe

Asset Quality

70. Asset quality remains satisfactory. The aggregate non-performing ratio (NPL) of
3.62% as at 30 June 2023 was within the Bank’s risk appetite, as well as the
internationally acceptable threshold of 5%. The ratio increased from 1.58% as at
31 December 2022 owing largely to revaluation effects on foreign currency
denominated non-performing loans. Figure 13 shows the trend in the level of
NPLs from December 2020 to June 2023.


Consumptive,
12.05%
Other, 10.28%
Agricultural,
17.48%
Manufacturing,
12.24%
Commercial,
6.42%
Mining,
11.78%
Dstribution,
14.19%
Construction,
1.78%
Transport, 1.39%
Communication,
1.17%
Financial, 6.37%
Mortgage, 4.84%
Productive,
77.67%

Figure 13: Trend in Non- Performing Loans


71. The Bank will continue to monitor credit risk in the sector.

Banking Sector Profitability
72. All banking institutions were profitable with reported aggregate profits of $4.55
trillion for the period ended 30 June 2023, compared to $181.25 billion reported
in the corresponding period in 2022. The growth in the banking sector income
largely emanated from non-interest income, which constituted 92.51% of total
income ($6.01 trillion) as at 30 June 2023. The income mix for the sector is
depicted in Figure 14.


Dec-20
Mar-21
Jun-21
Sep-21
Dec-21
Jun-22
Sep-22
Dec-22
Mar-23
Jun-23
NPL Performance (%)
Period
NPL
Benchmark

Figure 14: Banking Sector Income Mix as at 30 June 2023


73. Reflecting the movement in the exchange rate, the total non-interest income ($5.56
trillion) mainly consists of revaluation gains from investment properties (70.78%),
fees and commissions (14.78%) and foreign exchange gains (14.45%).

74. The return on assets and return on equity ratios were 26.11% and 74.60% as at 30
June 2023, compared to 8.67% and 31.60% as at 30 June 2022, respectively. The
trend of banking sector profitability indicators over the period 31 March 2021 to
30 June 2023 is shown in Figure 15.


Interest Income from Loans
Advances and Leases
5.80%
Interest Income on
Balances with Banking
Institutions
0.23%
Interest Income on
Investments and
Securities
1.53%
Foreign Exchange
13.35%
Fees and Commission
13.66%
Other Non Interest
Income
65.43%

Figure 15: Returns on Assets and Earnings as at 30 June 2023


Banking Sector Deposits and Liquidity
75. As at 30 June 2023, the sector’s average prudential liquidity ratio was 59.88%,
largely reflecting high stock of liquid assets in the sector. The trend in the
prudential liquidity ratio from 31 December 2020 to 30 June 2023 is shown in
Figure 16.


Mar-21
Jun-21
Sep-21
Dec-21
Mar-22
Jun-22
Sep-22
Dec-22
Mar-23
Jun-23
Return on Assets
Return on Equity

Figure 16: Prudential Liquidity Ratio Trend

76. Total deposits increased from $2.29 trillion as at 31 December 2022 to $14.66
trillion as at 30 June 2023. The increase was mainly driven by growth in foreign
currency deposits. Commercial banking sub-sector deposits constituted 87.75% of
total banking sector deposits. Foreign currency deposits accounted for 88% of total
deposits as at 30 June 2023. The trend of banking sector deposits over the period
30 June 2021 to 30 June 2023 is shown in Figure 17.

Figure 17: Trend in Banking Sector Deposits


DEC-20
JUN-21
DEC-21
JUN-22
SEP-22
DEC-22
MAR-23
JUN-23
PLR
regulatory benchmark

30-JUN-21
30-SEP-21
31-DEC-21
30-JUN-22
30-SEP-22
31-DEC-22
31-MAR-

30-JUN-23
ZW$ Billions

Banking Sector Developments

Bank Charges
77. Having regard to the need to strike a balance between business viability and the
provision of affordable and accessible products and services in the spirit of
promoting financial inclusion, the Bank continues to monitor bank charges, in
collaboration with the Bankers Association of Zimbabwe.

78. Against this background and cognizant of the relative exchange rate stability in
the economy, the pricing model agreed between the Bank and Bankers Association
of Zimbabwe in May 2022 will be maintained. The said pricing model allows
consideration of a review periodically, having regard to factors affecting such
pricing including exchange rate movements.

79. The Bank will continue to monitor the terms and conditions of business activities
to ensure adherence to the pricing model, fair business practices and reasonable
pricing in line with the Banking Act, and the Consumer Protection Framework.

Climate Risk Management
80. The Bank issued a Climate Risk Management Guideline to the banking sector in
April 2023 in line with international developments. The Guideline seeks to
strengthen the resilience of the banking system to climate-related risks by
promoting the development and implementation of sound climate risk
management practices and methodologies, taking cognisance of physical and
transition risks associated with climate risk.

Model Risk Management
81. Banking institutions are increasingly relying on modelling in most aspects of their
decision-making on the back of a more complex and diverse range of activities

that include risk management, capital adequacy calculations, pricing of loans, and
stress testing.

82. In line with best practice, the Bank issued a Model Risk Management Prudential
Standard in July 2023. The Standard provides for sound development,
implementation, and rigorous model validation as vital elements of model risk
management in regulated institutions.

Contingency Planning
83. The Bank, in collaboration with other domestic financial sector regulatory
agencies under the auspices of the Multidisciplinary Financial Stability
Committee, is in the process of operationalizing the Contingency Planning &
Systemic Crisis Management Framework. The Framework seeks to strengthen
crisis preparedness capabilities through requisite institutional arrangements,
resolution planning, techniques, strategies, funding arrangements, and crossborder cooperation, in line with best practices. Enhancement of the legal
framework is also underway.


Sustainability
84. Sustainability is transitioning to the fore of the global financial landscape by
becoming a strategic priority, against the realisation that strong, resilient and
sustainable institutions contribute meaningfully to inclusive sustainable economic
development and attainment of Sustainable Development Goals (SDGs).

85. In this regard, the Bank remains resolutely focused on the implementation of
sustainable banking practices in the financial sector and is working closely with
the sector in the implementation of the sustainability standards under the
Sustainability Standards & Certification Initiative (SSCI) being driven by the
European Organization for Sustainable Development (EOSD). It is envisaged that

sustainability-certified institutions will play a catalytic role in the growth and
sustainable development of the economy.

86. As at 30 June 2023, 14 banking institutions including, one (1) deposit-taking
microfinance institution (Zimbabwe Women’s Microfinance Bank Limited) were
participating under the Central Bank-led Sustainability Standards and Certification
Initiative.

87. In light of the envisaged benefits of sustainability certification, participating
banking institutions have scaled up efforts to accelerate the implementation
process and to build the requisite capacity at the management and board level.

Draft Microfinance Regulations
88. The proposed Microfinance Regulations, necessary for the Microfinance Act
[Chapter 24:30] now await gazetting. The draft Microfinance Regulations are
aimed at operationalizing certain sections of the Microfinance Act including
minimum capital, shareholding limits and asset quality requirements.

89. Additional proposals are being made to shareholding and governance regulatory
framework to provide different thresholds for credit-only institutions which are
usually financed through entity’s shareholders as opposed to institutions that are
funded through deposit-taking.

Regulatory Framework for Bank Resolution
90. The Bank, in liaison with the Deposit Protection Corporation, has completed the
drafting of the enhanced legal framework for bank resolution and crisis
management. The draft layman’s Bill will now be undergoing peer review with
the International Monetary Fund and the International Association of Deposit
Insurers.

Performance of the Microfinance Sector
91. Microfinance is increasingly considered a key instrument in the implementation
of effective and sustainable strategies aimed at poverty alleviation and inclusive
economic development. The microfinance sector in Zimbabwe continues to
contribute towards the attainment of Zimbabwe’s 2030 Vision of ‘an Upper
Middle-Income Society by 2030’ through the provision of essential financial
services to low-income and marginalised communities and their micro and small
enterprises.

92. On aggregate, the sector registered growth in all the main performance indicators
over the review period, including loan portfolio, capitalization level, profitability
and deposits mobilization by the deposit-taking microfinance subsector. As at 30
June 2023 there were 216 registered microfinance institutions, comprising 208
credit-only and eight (8) deposit-taking microfinance institutions.

Microfinance Sector Capitalization
93. The microfinance sector registered a 596.83% increase in aggregated equity from
$35.91 billion as at 31 December 2022 to $250.23 billion as at 30 June 2023. The
increase was attributed to organic growth and fresh capital injection by some
microfinance institutions.
Capitalisation of Deposit-taking Microfinance Institutions
94. Three out of seven operating DTMFIs were compliant with the minimum capital
requirement of ZW$5 million as at 30 June 2023, and these were African Century
Limited, InnBucks Microbank and Success Microfinance Bank. The noncompliant DTMFIs are at various stages of capital raising initiatives and they
continue to submit on a quarterly basis, updates on their re-capitalisation
initiatives.

95. As at 30 June 2023, the aggregate core capital for the DTMFI sub-sector was
$131.32 billion, a significant increase from $29.49 billion as at 31 December 2022.

The increase was largely driven by fresh capital injections, as well as organic
growth.

96. A total of 170 out of 208 credit-only microfinance institutions were compliant with
the minimum capital requirements of ZW$ equivalent of USD25,000. The noncompliant credit-only microfinance institutions are putting in place recapitalization strategies to comply with the requirements and to facilitate the
underwriting of more meaningful businesses.

Loan Portfolio
97. Total loans for the microfinance sector increased by 672.66% from ZW$46.01
billion as at 31 December 2022, to ZW$355.50 billion as at 30 June 2023. The
sector registered an improvement in the loan portfolio quality as evidenced by a
decrease in the portfolio-at-risk (>30 days) ratio from 10.95% to 9.48% over the
same period.

Profitability
98. The microfinance sector registered significant progress with an aggregate net
profit of $145.52 billion for six months ended 30 June 2023, from $4.93 billion
recorded during the comparable period in 2022. The increase, which exceeded the
annual inflation of 175.8% as at 30 June 2023, was largely attributed to improved
operational efficiency as reflected by an improvement in the average operational
self-sufficiency (OSS) ratio to 230.39% for the six months ended 30 June 2023
from 202.50% registered in the comparative period in 2022, against the
international benchmark of 100%.

Deposits Mobilisation
99. Aggregate deposits for the deposit-taking microfinance sub-sector increased by
456.89% from $9.58 billion as at 31 December 2022, to $53.35 billion as at 30
June 2023. While the deposit levels remain low, the trend in the level of deposits
in the sector reflects growing consumer confidence in the sector.

National Financial Inclusion Strategy II Implementation
100. Financial inclusion remains a key priority area and a strategic goal for financial
markets development, and a major driver for inclusive economic development in
line with the country’s development aspirations as outlined in the National
Development Strategy 1, under the mantra ‘leaving no one and no place behind’.

101. Following the launch of the National Financial Inclusion Strategy II on 31 October
2022, the Bank continues to champion a number of initiatives as part of the NFIS
II implementation process.

Financial Literacy Program
102. Financial Literacy is one of the pillars of financial stability as it equips consumers
of financial services with knowledge and skills to make more informed financial
decisions. Given that improving financial literacy is a long-term behavioural
change, the Bank will continue to champion and coordinate financial literacy
programs among both adult consumers of financial services and young people.

103. Financial literacy programs were held in four (4) provinces under the Global
Money Week celebrations from 6-31 March 2023. The Bank continued to receive
and provide financial literacy to visiting school children. Further, the Bank has
embarked on financial inclusion campaigns across the country’s provinces through
various platforms including the NDS I dissemination programmes spearheaded by
the Ministry of Finance and Economic Development

104. The Bank is developing a National Financial Literacy Framework to facilitate a
coordinated approach to financial literacy. Engagement with various stakeholders
is currently underway before finalizing the framework.

Thematic Working Group Meetings
105. As part of a coordinated approach to implementing financial Inclusion, NFIS II
Thematic Working Groups Meetings were held in June and July 2023 to finalise
the activities for the ten thematic areas under NFI II.

Financial Inclusion Indicators
106. Following the launch of National Financial Inclusion Strategy II in October 2022,
there has been notable progress in access to formal financial services by the
targeted groups such as women, SMEs and youth. The financial inclusion
indicators in the Table 9 reflect the improvement since December 2021.

Table 9 Financial Inclusion Indicators

107. While the FinScope Consumer and MSME surveys indicate significant progress
on the access strand, in terms of usage, utilization of financial services by the
marginalised groups remains low. Loans to MSMEs, women and youth as at 30
Indicator
Dec-21
Mar-22
Jun-22
Sept-22
Dec 22
March 23
June 2023
Number of Loans to
MSMEs

Nominal Value of
loans
to
MSMEs
(ZW$ Million)


49,714.31

74,605.00

433,852.86
Average
loans
to
MSMEs as % of total
bank loans

Number of Loans to
Women


177,671
165,459
206,886
Nominal Value of
Loans
to
Women
(ZW$ Million)

Average
loans
to
women as a % of total
bank loans

Number of Loans to
Youth

Nominal Value of
Loans to Youth (ZW$
Million)

Average loans to the
youth as a % of total
bank loans

Total
number
of
Active
Bank
Accounts (Million)

Number of Low-Cost
Bank
Accounts
(Million)


June 2023 accounted for 4.58%, 3.64% and 2.72% of total bank and microfinance
loans. Various initiatives are underway to increase the usage of financial services
among the marginalised groups.

Collateral Registry Update
108. Cognisant of the need for access to credit for the greater part of the country’s
population, the Bank launched an online Collateral Registry in terms of the
Movable Property Security Interest [Chapter 14:35].

109. As at 30 June 46 institutional users had been registered in the system since the
commencement date was gazetted on 4 November 2022. Registered institutions
include banks, microfinance institutions and law firms.

110. The Collateral Registry system recorded 377 active registered security interests
with a total loan amount of ZW$620.02 billion as at 24 July 2023 as shown in
Figure 18.

Figure 18: Value of Registered Securities as at 24 July 2023


111. In addition, 323 searches were conducted during the same period as shown in
Figure 19:

Figure 19: Searches by Client as at 24 July 2023


112. The types of collateral registered in the system are shown below.

Figure 20: Types of Collateral

113. The operationalisation of the collateral registry marks a critical milestone in access
to credit and will facilitate borrowing opportunities for micro, small to medium
enterprises in the outlook period.
114. As part of its communication strategy to promote awareness and ensure effective
operationalization of the Collateral Registry, the Bank conducted training and

Building Society
Commercial
Bank
Credit Only
Microfinance
Institution
Development
Finance
Institution
Public Searches
Savings Bank

awareness workshops in Harare, Bulawayo, Gweru, Masvingo, Mutare and
Beitbridge between April and July 2023.

115. The workshops targeted banking institutions, microfinance institutions, MSMEs
and Law firms. The Bank will continue to drive the communication strategy to
ensure awareness and full adoption of the Registry across the country.

Credit Information Sharing Environment
116. The credit databases at the Credit Registry and the three private bureaus continue
to offer reference points for lenders to check the credit worthiness of clients during
origination and through the cycle of the loans. The four credit reporting institutions
in the country held 22.96 million searchable records as at 30 June 2023. Figure 21
indicates the cumulative records per institution.

Figure 21: Cumulative Loan Records per Credit Reporting Institution

117.
118. In the Credit Registry the open and closed loan records were at 28.61% and
71.39% of the total loan records of 2.26 million as at 30 June 2023, respectively.
Registered subscribers accessing the Credit Registry database were 243 as at 30
June 2023.
119. Credit Registry inquiries have been on an upward trajectory reflecting growth in
usage as depicted in Figure 22.


FCB
Credit Registry
XDS
Fincheck
Number of Loan Records
(Millions)

Figure 22: Credit Registry Usage Status

120. Gender distribution of loans is generally skewed towards male borrowers who
constituted 68.01% while female borrowers constituted 31.99% of loan contracts
in the Credit Registry. Over the year there were more women accessing to financial
services for the first time compared to men as indicated in Figure 23.


Jun-17
Dec-17
Jun-18
Dec-18
Jun-19
Dec-19
Jun-20
Dec-20
Jun-21
Dec-21
Jun-22
Dec-22
Jun-23
Cumulative Inquiries

Figure 23: New to Financing as at 30 June 2023

121. In terms of age and gender distribution, the 31-40- and 41-50-years age groups
dominate the number of borrowings with male borrowers dominating in both age
groups as shown in Figure 24.

Figure 24: Credit Registry Loans by Gender and Age


Female
Male

Number of Loan Contracts
Number of Loan Contracts by Men
Number of Loan Contracts Women

NATIONAL PAYMENT SYSTEMS DEVELOPMENTS

122. The payment systems services sector comprising 24 payment system providers
and 25 participant banks remained sound, safe, and recorded significant
improvements. During the six months to June 2023, aggregate digital payments
transaction values increased by an average of 40%, whilst volumes fell by a
marginal 4% as shown in Figure 25.

Figure 25: Digital Payments Transaction Values and Volumes from Jan-June

*Digital Payments Include Transactions conducted on the RTGS, Card, Mobile Money,
Mobile Apps, and Online platforms

123. During the six months to June 2023, a total of 376.6 million transactions valued at
ZW$83.6 trillion were processed through the national payment system.

Real Time Gross Settlement System (RTGS
124. RTGS continues to dominate because it caters to large value transactions with a
value of ZW$48.0 trillion during the first half of 2023. On the SADC Real Gross
Settlement System (SADC-RTGS), the 14 Zimbabwean participant banks


Jan-23
Feb-23
Mar-23
Apr-23
May-23
Jun-23
Volumes in millions
Values in billions
TRANSACTION VALUES IN BILLIONS
TRANSACTION VOLUMES IN MILLIONS

processed 2,159 transactions valued at ZAR3.1 billion during the six months ended
June 2023.

Interoperability
125. The country continued to witness growth in interoperability transactions with the
value processed for retail digital transactions reaching ZW$187.5 billion in June
2023, as shown in Figure 26.

Figure 26: Interoperability Transactions: values and vol Jan 22 to Jun23


Access Devices and Points
126. All access devices, except credit cards, recorded growth during the period under
review as shown in Table 10.

Table 10: Payment Access Points and Devices as of June 2023


%
CHANGE

Jan-23
Feb-23
Mar-23
Apr-23
May-23
Jun-23
ATMs

0.24%
POS

MPOS

PAYMENTS SYSTEMS ACCESS DEVICES
Debit
Cards
5,550,881 5,799,800 5,892,135 5,698,111 5,740,254 5,706,854
-0.58%
Credit
Cards

Prepaid
Cards

Mobile
Banking
Subscribers
7,283,840 8,125,125 7,097,833 7,554,180 7,760,726 7,915,941
2.00%
Internet
Banking
Subscribers


SWIFT ISO 20022 Migration from MT Messages
127. Local financial institutions successfully upgraded their SWIFT infrastructure for
incoming Cross Border Payments and Reporting plus (CBPR+) on the
implementation of the ISO20022 standard, in line with the SWIFT set deadline of
March 2023. Banks continue to work towards ensuring full compliance with the
other outstanding SWIFT Cross Border outgoing payment processes for the
CBPR+ ISO 20022 program and SADC-RTGS going live in August 2023.

Cybersecurity Management
128. To manage cyber security risk on payment cards, the market is urged to ensure
that all card access devices and POS as well as MPOS access points are EMV
compliant by October 2023.

Anti-Money Laundering and Counter-Financing of Terrorism (AML-CFT)
129. The Bank continues to implore the financial sector to deploy risk-based systems
in their surveillance of elevated threats especially given the dynamic digital
innovations taking place worldwide. Board understanding of AML/CFT issues as
well as internal controls are now critical areas for oversight. The Bank continued
to offer training programs to ensure compliance with AML/CFT regulations.

Pan-African Payment and Settlement System (PAPSS)
130. The Bank is implementing the PAPSS, which is a continental RTGS system being
promoted by the African Export and Import Bank (Afreximbank) as the settlement
bank. The payment system is meant to complement and interoperate with the
existing cross-border payment schemes currently in operation. PAPSS is aimed at
connecting all banks, non-banks, switches, and regional systems in Africa to
enhance cross-border payment efficiency across Africa.

Consumer Protection in Digital Financial Services
131. The Bank continued to promote informed conflict resolution and management
processes based on the rights, fairness, transparency and interests of consumers.
The Bank continued to participate in efforts to educate the transacting public
through various platforms including roadshows which have been a huge success
in enhancing financial literacy and digital financial services awareness.

132. Under Fintech developments, the Bank’s focus is to ensure consumers are at the
center of innovation without jeopardising financial stability and in line with
AML/CFT issues.

Central Bank Digital Currency and Tokenization Projects
133. Following Cabinet approval in July 2022 for the Bank to pursue the roadmap for
the introduction of a Central Bank Digital Currency (CBDC), the Bank continues
to make steady progress on the project. In this regard, a consumer survey was
carried out during which 3,260 responses were received from the public.
Notwithstanding the observed limited knowledge about CBDCs, 71.7% of the
respondents confirmed their willingness to use a CBDC if the Bank introduced it.
It is in this evidence-based context that the Bank proposes to take the road towards
CBDC in measured stages as the result of the survey gives the Bank sufficient
impetus to move to the next stage.

134. Given the above, the Bank has accelerated efforts toward the digitization of gold
through gold-backed digital tokens (GBDT). The GBDT will primarily serve as
an alternative investment instrument which shall be scaled up to be used for
transactional purposes by the public. The GBDT allows investors to preserve their
value, but above all allows for divisibility, as the milligram is one thousandth of a
gram.

135. Similar to the physical gold coins introduced by the Bank in 2022, the GBDTs
were introduced in response to continued strong domestic investor demand for
convenient and reliable market-based instruments for value preservation. The
GBDTs are, therefore, an added convenient instrument that allows investors to
enjoy the same value preservation benefits of physical gold without the security
risk and indivisibility of holding physical gold coins.

136. Given the above, the potential of the GBDTs to transform the investment and
currency markets is immense. Continued uptake of the GBDTs is, therefore,
envisaged to sustainably anchor inflation and exchange rate expectations.

137. On account of their effectiveness in mopping liquidity, the GBDTs have since
proved to be an effective monetary policy instrument with strong potential to help
restore normalcy to the domestic financial and capital markets within the short
term. In addition, the divisibility nature of the digital gold tokens conforms to the
national objective of leaving no one and no place behind in national development
initiatives. This is again in line with the Bank’s longstanding commitment towards
financial inclusion as it enhances access and affordability for a wide cross-section
of economic agents across all income brackets.

138. The Bank is at an advanced stage in preparations for the rolling out of GBDTs for
transactional purposes in Phase II of the project under the code or name ZiG, which
stands for Zimbabwe Gold. It is envisaged that the transactional phase will see
GBDTs complimenting the demand for the US dollar in domestic transactions as
retailers will be offered a safer, more convenient, and value-preserving medium of
exchange. As such, appropriate awareness campaigns would be conducted in all
provinces and districts of the country to educate the public on the use and benefits
of GBDT.

139. Consultations with various stakeholders including the Confederation of Zimbabwe
Industries (CZI) and the Zimbabwe National Chamber of Commerce (ZNCC) and
the Retailers Association of Zimbabwe (RAZ) have already been undertaken and
banks are now configuring their systems to allow for the issuance of cards which
will be denominated in ZiG.

SECTION FIVE: BALANCE OF PAYMENTS DEVELOPMENTS

140. The current account balance is estimated to have narrowed to a surplus of US$38.3
million in the first half of 2023, compared to a surplus of US$397.9 million for the
same period in 2022. This followed a more significant trade deficit, as exports
contracted, while imports increased. The current account was further weighed
down by services and primary income account that also registered the deficits.
Remittances and other transfers (secondary income flows), however, remained
resilient, thereby offsetting the deficits in the services and primary income
accounts.

141. This, notwithstanding, the estimated current account balance is projected to
strengthen in the second half of the year on account of projected bullish tobacco,
gold and lithium export performance and resilient diaspora remittances.

Figure 27: Current Account Developments (US$ millions)

Source: RBZ and ZIMSTAT Estimates, 2023

142. Merchandise exports declined by 8.2%, from US$3 479.0 million in the first half
of 2022 to US$3 194.2 million for the corresponding period in 2023, mainly
-600
-400
-200

2022Q1
2022Q2
2022Q3
2022Q4
2023Q1
2023Q2
Trade Bal
Services Bal
Bal on Primary Income
Bal on secondary Income
Current Account Bal

weighed down by the subdued performance in mineral exports. Mineral exports,
which account for the largest share of merchandise exports, declined by 12.5%,
from US$2 898.9 million in the first half of 2022 to US$2 5836.8 million, during
the period under review. The decline in exports followed the continued softening
of key commodity prices largely on account of faltering global growth prospects.

143. The country’s agricultural exports increased by 15.9%, from US$399.9 million in
the first half of 2022 to US$463.5 million in 2023, during the period under review,
driven by tobacco exports. Horticultural exports were, however, subdued owing to
lagged effects of higher input costs for fertilizer, chemicals, fuel, packaging, and
labour, which increased significantly in 2022.

144. Manufactured exports increased by 7.6%, from US$180.6 million recorded in the
first half of 2022 to US$193.84 million in the corresponding half in 2023, largely
driven by rising tobacco cigarette exports. Low competitiveness, which emanated
from high production and market development costs and antiquated machinery,
however, continued to adversely affect manufactured exports.

145. Merchandise imports registered a 3% increase, from US$3 965.3 million in the
first half of 2022 to US$3 849.4 million in 2023, driven by growth in fuel,
machinery, and electricity imports. As the economy expands, so does its capacity
to absorb imports that feed into the production process. The country’s import bill
was, however, moderated by reduced crude oil, edible oils and fertilizer prices.

International Remittances
146. As at 30 June 2023, total international remittances through official channels
amounted to US$1,433 million, an increase of 4% from US$1,371 million during
the same period in 2022. Of the total amount, diaspora remittances amount to
US$919 million, a 15% increase from US$797 million received during the same

period in the year 2022. International remittances received through the normal
banking system on behalf of International Organizations (NGOs) amounted to
US$514 million, an 11% decrease the from previous year of US$574 million. Of
the total diaspora remittances, 29% came from South Africa followed by the
United Kingdom (22%).

Foreign Payments Performance
147. The total foreign inflows of US$5.6 billion for the first six months of 2023 were
against a total of foreign payments of US$4.4 billion, resulting in net foreign
currency inflows of US$1.2 billion. This, coupled with restrictive monetary policy
further testifies to the soundness of the economy’s external and monetary
fundamentals that are envisaged to sustain favourable exchange rate and inflation
dynamics in the short to medium term.

148. For the first half of 2023, Authorised Dealers processed foreign payments
amounting to US$4.39 billion. This represented a 14.8% increase,
from US$ 3.83 billion recorded for the same period in 2022. The upward trajectory
in foreign payments shows the increased capital absorptive capacity as the
economy grows.

149. The foreign payments were mainly towards capital and raw materials/intermediate
goods, and this has gone a long way in enhancing industry capacity utilisation.
Also, of significance are foreign payments for fuel that have continued to increase
driven by domestic demand thereby offsetting the positive impact of the decline
in global energy prices. Table 11 shows foreign payments by category.

Table 11: Foreign Payments by Category in USD Millions (Jan –Jun 2023)

% Variance
Contribution

Contribution

Merchandise Imports (excl. energy)

- Raw Materials & Intermediate
Goods

- Capital Goods

- Consumption & Finished
Manufactured Goods

Energy (Fuel & Electricity)

- Fuel

- Electricity

Service Payments

- Technical, Professional &
consultancy

- 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

- Card Payments

- Refunds

Total

Source: RBZ (2023)

SECTION SIX: NEW MONETARY POLICY MEASURES

150. The policy measures pursued by the Bank during the first half of the year 2023,
through its implicit monetary policy anchor of a combination of using the Bank
policy rates and exchange rate targeting have brought stability in prices and the
exchange rate and sanity and calmness in the domestic markets. The calmness in
the domestic markets ably attests to the fact that the economy is on the right track
to price and exchange rate stability and the need to stay the course of the right
policy mix remains critical.

151. In view of the above context, the Bank will continue to implement a tight monetary
policy stance for the next six months to sustainably anchor inflation and exchange
rate expectations. The tight monetary policy path will be anchored on the
following measures:

Interest rates
i.
The Bank policy rate which is currently at 150% will be reviewed in line
with developments in the month-on-month inflation;
ii.
The medium-term accommodation lending rate which is currently at 75%
will also continue to be reviewed in line with inflation developments and
long-term productive sector funding needs;
iii.
The Bank policy rate remains the minimum lending rate for all banks; and
iv.
The deposit interest rates on savings and time deposits which are currently
pegged at 30% and 50% per annum, respectively, will also be reviewed in
line with inflation developments.

Statutory Reserves
152. The statutory reserve requirements continue to play a significant role in mopping
excess liquidity and ensuring the continued safety and soundness of the domestic

banking sector. In this regard, the current statutory reserve requirements levels on
local and foreign currency demand and call deposits will remain at 15% and 10%,
respectively. The statutory reserve requirements on savings and time deposits
would remain at 5% across all deposits to support domestic savings. The Bank will
review the statutory reserve requirements consistent with monetary and financial
conditions.

Non-negotiable Certificate of Deposits
153. The Bank shall strengthen the operation of the Non-negotiable Certificate of
Deposits (NNCDs) which are being used to mop excess local currency liquidity
through the introduction of NNCD maturity profiles of 7,14, 21 and 30 days with
immediate effect.

Gold coins and gold-backed digital tokens
154. The Bank is at an advanced stage in the preparations for the eventual rolling out
of GBDT for transactional purposes in Phase II of the project under the code or
name ZiG, which stands for Zimbabwe Gold. It is envisaged that the transactional
phase will see GBDT complementing the use of the US dollar in domestic
transactions.

155. The Bank will conduct appropriate awareness campaigns in all national provinces
and districts of the country to educate the public on the use and benefits of GBDT.
The GBDT are envisaged to form the basis for the development of the country’s
central bank digital currency (CBDC) since ZiG in its current form and design
exhibits most of the characteristics of a CBDC.

Auction System
156. The foreign currency auction system remains a critical source of foreign currency
for the economy. As such, the Bank shall continue with the current auction system

in place and further liberalise the use of foreign exchange from the wholesale
auction system by allowing banks to meet bonafide small foreign payment
requirements for their customers, including individuals and Micro, Small and
Medium Enterprises (MSMEs) in order to enhance financial inclusion.

Localisation of Tobacco Production Financing
157. In terms of Section 4 of the Exchange Control (Tobacco Finance) Order, Statutory
Instrument 61 of 2004, tobacco merchants are required to source offshore
financing to produce and buyback green leaf tobacco. Tobacco merchants who fail
to secure offshore financing are required to apply to the Bank for authority to raise
funds on the local market.

158. With immediate effect, there will be no restrictions on the use of locally sourced
funds to support the production of tobacco in the country.

159. Considering this development, the Exchange Control (Tobacco Finance) Order,
Statutory Instrument 61 of 2004 shall be amended to take account of this change.

Regularisation of Tourism Agreements with External Partners
160. The Bank is granting a moratorium to all tourism operators who have unregistered
tourism agreements and unapproved offshore accounts to regularise the
agreements and offshore foreign currency accounts, with the Bank before 31
August 2023.

SECTION SEVEN: ECONOMIC OUTLOOK
161. The bold measures put in place by the Bank and Government which include a
combination of the further liberalisation of the foreign exchange market, continued
mopping of excess liquidity through the wholesale auction and digital gold-backed
tokens coupled with measures to strengthen demand for local currency and
operationalisation of the blocked funds debt assumption by Government have

stabilised the exchange rate and firmly anchored inflation expectations. The robust
macroeconomic fundamentals are expected to anchor and sustain the current
stability in the medium to long term.

Inflation Outlook
162. The upward trend of month-on-month inflation which sharply reversed in July
2023 to minus 15.3% is expected to continue to correct in August 2023. In the
outlook, monthly inflation is expected to continue to decline with annual inflation
expected to end the year between 60% and 70%.

Balance of Payments Outlook
163. On the external front, the current account surplus is envisaged to narrow slightly
to US$274.5 million in 2023, from US$305.0 million in 2022, driven by robust
performance in the export receipts and transfers in the form of diaspora
remittances and humanitarian transfers, against the relatively elevated external
payments.

164. Merchandise exports are envisaged to close the year at US$7 121.8 million, a 1.7%
increase from US$7 000.2 million in 2022, driven by surging gold, lithium,
diamond and tobacco exports notwithstanding subdued PGMs exports as their
prices remain depressed. On the other hand, merchandise imports are projected to
close the year at US$8 343.2 million, 2.6% up from US$8 131.8 million in 2022,
driven by increases in grain, fuel, machinery, and electricity imports.

SECTION EIGHT: CONCLUSION
165. The economy has responded favourably to the measures put in place by
Government and the Bank to address the volatility in the foreign exchange market.
To ensure the full benefits of these measures and to sustainably anchor the inflation

expectations, the Bank’s current monetary policy stance will be maintained during
the six months to December 2023, with appropriate revisions being done in line
with inflation developments.

166. More importantly, the robust macroeconomic fundamentals as attested by a
healthy balance of payments, fiscal sustainability, higher manufacturing sector
capacity utilisation, improved foreign currency receipts relative to foreign
payments and continued monetary restraint will anchor the obtaining price and
exchange rate stability in the medium to long term. In this context, the Bank
strongly believes that the current stability is sustainable in the medium to long
term.

I Thank You


Dr. John P Mangudya
Governor


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Reserve Bank of Zimbabwe
Machel Avenue Box 1283

Tel:

Email:
Reserve Bank of Zimbabwe
Box 399 Bulawayo, Zimbabwe
Tel:
Email:
www.rbz.co.zw
@ReserveBankZim
@ReserveBankZim