2024 MONETARY
POLICY STATEMENT
BACK TO BASICS: RECALIBRATING THE
MONETARY POLICY FRAMEWORK TO
ANCHOR CURRENCY, EXCHANGE RATE
AND PRICE STABILITY
By
DR JOHN MUSHAYAVANHU
GOVERNOR
05 APRIL 2024
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TABLE OF CONTENTS

TABLE OF FIGURES

LIST OF TABLES

SECTION ONE

INTRODUCTION AND BACKGROUND

1.
This Monetary Policy Statement, which is issued in terms of Section 46 of the
Reserve Bank Act [Chapter 22:15] comes at a time when the economy is
experiencing growth in an inflationary economic environment. The exchange rate
and inflation volatilities experienced in the economy in the recent past are inimical
to the sustenance of the local currency under the multi-currency system, which
demands predictability, convertibility, transactional convenience, and reliable
store of value properties. As a result of the cumulative depreciation of the local
currency, the Zimbabwe dollar banknotes have become too small and inconvenient
for the transacting public given the price levels obtaining in the economy.
2.
In addition, there is a problem of change for foreign currency transactions. This
challenge has compelled some retailers to devise ways of circumventing the
problem, including resorting to either using shop coupons or forcing consumers to
buy small items such as sweets, chocolates, and pens outside their shopping plans.
This sometimes presents some challenges to shops when customers are not willing
to accept coupons or sweets instead of change. The Bank has also witnessed a
growing trend of some retailers, wholesalers, and banks refusing to accept soiled
or torn US$ notes, much to the inconvenience of consumers.
3.
The EL-Nino-induced drought, which has turned out to be more severe than
initially anticipated is expected to impact negatively on the domestic economy’s
growth trajectory. The dry spell and high temperatures experienced since the
beginning of February 2024 have greatly affected the 2023/24 summer crop which
was generally fair in January 2024. The domestic growth trajectory will also be
affected by a slowdown in commodity prices, and subdued aggregate demand.
However, other sectors such as construction and tourism will remain on a positive
growth path and even support the economy’s resilience.

4. The subdued growth of the economy will further be exacerbated by the pass-through
effects of the big global funding squeeze which has seen global interest rates
remaining elevated amid lingering inflationary pressures. In addition, geo-political
factors characterised by the wars in Ukraine and Gaza with their concomitant
adverse implications for global trade and supply-side logistics remain a drag on
global economies, including Zimbabwe.

5. Given the above concerns, the Bank is recalibrating its monetary policy framework
to re-anchor price and exchange rate stability and to boost confidence in the local
currency. The Bank’s priority policy focus is critical for supporting the economy’s
growth prospects through the restoration of stability, convertibility, and transactional
convenience of the local currency. In addition, fostering the continued use of the
local currency plays an important role in the multi-currency basket.

6. The recalibrated monetary policy stance will be supported by strong macroeconomic
fundamentals as attested by the continued favourable balance of payments, fiscal
stability, optimal money supply management, and a safe and sound banking sector.
The country’s foreign currency generation capacity has remained robust with a total
of US$11.0 billion foreign currency having been received in 2023, albeit slightly
lower than the US$11.4 billion received in 2022. The foreign currency receipts for
January and February 2024 amounted to US$2.2 billion compared to US$1.8 billion
received during the same period in 2023, representing a 23% increase.

7. The robust foreign currency receipts supported the improved foreign currency
deposits in the banking sector, foreign currency circulating in the economy, and
overall aggregate demand.
8. In line with global trends, the country’s monetary and financial conditions have also
remained tight with the local currency constituting just under 20% of the total money
supply in the economy. As such, the observed growth in monetary aggregates has

mainly been attributed to the impact of exchange rate movements. The financial
sector has remained safe, sound, and adequately capitalised to ably support the
envisaged growth trajectory.

9. Moreover, confidence in the banking sector has been growing as evidenced by
sustained growth in foreign currency deposits in correspondent banks from around
US$400 million in 2018 to US$2.4 billion in 2023. The optimal mix of the
Zimbabwe and US dollars under the multi-currency system, therefore, needs to be
supported to anchor the growth trajectory of the economy and enhance the domestic
foreign exchange resource mobilisation in the context of the big global funding
squeeze.

10. Against this background, this Monetary Policy Statement primarily focuses on
immediate measures necessary to boost the demand for local currency in the multicurrency economy, fostering a stable and sustainable exchange rate, rebuilding
market confidence and policy credibility and supporting a stable and sustainable
economy as enshrined in Vision 2030 and (National Development Strategy 1)
NDS1.
11. The rest of the Statement is organised as follows: Section Two assesses the
effectiveness of previous monetary policy measures; Section Three highlights the
recent global and domestic economic developments and outlook; Section Four
provides financial sector developments; Section Five provides the new monetary;
policy stance for the next six months; Section Six outlines the economic and inflation
outlook; and lastly Section Sevent concludes the Monetary Policy Statement.


SECTION TWO

ASSESSMENT OF PREVIOUS MONETARY POLICIES

12. The Monetary Policy measures implemented by the Bank since July 2023 have
assisted in supporting economic resilience and mitigating speculative attacks on the
foreign exchange markets. The Bank maintained a tight monetary policy stance
typified by high interest rates, tight liquidity management, and management of
foreign exchange to foster price and exchange rate stability in the economy. An
evaluation of the policies implemented since July 2023 is .

Interest Rate Policy
13. The Bank continued to review the Bank policy rate in line with inflation trends in
the economy. The review of the Bank policy rate from 150% to 130% per annum
was driven by the sustained decline in inflation in the economy. The high interest
rates have gone a long way to curb speculative borrowing which was exacerbating
pressure for foreign currency.
14. Monthly inflation declined from a peak of 12.1% in June 2023 to an average of 2.1%
up to December 2023. However, inflation peaked at 55.3% in March 2024, from
about 47.6% in February 2024, mainly driven by the pass-through effects of
exchange rates.

15. The potential negative impact of high interest rates on economic growth was,
however, addressed through the Medium-Term Bank Accommodation (MBA)
facility which had relatively lower interest rates pegged at 75% per annum. This
facility has gone a long way in supporting the productive sectors of the economy.

Gold coins and Gold-backed digital tokens
16. The Bank continued to use value preservation instruments which included gold coins
and Gold-Backed Digital Tokens (GBDTs) to manage liquidity. A total of 39,103
gold coins of various denominations with a cumulative value of ZW$63.47 billion
and US$0.8 million, had been sold as of 31 March 2024. The bulk of gold coin sales
(78%) were taken up by corporates while individuals accounted for 22%.

17. A total of 1,624 gold coins were redeemed by customers between 25 January 2023
and 31 March 2024, of which 1,447 coins and 177 coins were for US$2.46 million
and ZW$700.4 million, respectively. All coins which were redeemed by customers
were resold to the market.
18. To increase the divisibility and affordability of gold coins, the Bank introduced
Gold-Backed Digital Tokens (GBDT) measured in milligrams, which is one
hundredth of a gram.
19. The Bank is currently issuing Gold-Backed Digital Tokens on tap basis. As of 31
March 2024, a cumulative total of 1163 applications were processed, purchasing
tokens valued at ZW$466.99 billion and US$5.0 million. The cumulative total
amount of gold purchased was 917,278,972 milligrams (equivalent to 917.2814 kg
of gold) as shown in Table 1.
Table 1: Gold Tokens Issuances-as of 31 March 2024
Date
Bids
Units Sold
(mg)
ZW$ Sales Value
US$ Sales
Value
May-23

266,967,413
30,640,507,714.07
3,155
Jun-23

54,652,930
18,580,144,742.54
4,560
Jul-23

3,404,181
1,274,507,245.42

Aug-23

5,038,032
1,636,676,380.76
5,003,200
Sep-23

20,127,868
7,821,881,845.49
8,517
Oct-23

23,579,941
9,842,487,408.28

Nov-23

22,921,827
9,600,064,905.32

Date
Bids
Units Sold
(mg)
ZW$ Sales Value
US$ Sales
Value
Dec-23

50,934,632
22,708,413,948.54

Total 2023

523,846,336
102,104,684,190.42
5,020,689
Jan-24

129,457,176
88,436,117,288.67

Feb -24

168,835,906
148,230,739,818.75

Mar-24

95,139,554
133,238,590,655.77

Total 2024

393,432,636
364,891,890,388.75

Grand Total

917,278,972
466,996,574,579.17
5,020,731

20. As of 31 March 2024, a total of 69,949,215 GBDT had been redeemed at a value
of US$4.146 million and ZW$1.6 billion. This represents under 10% of the total
GBDT issued, a reflection that most of the instruments were purchased as a store
of value.

Statutory Reserves
21. The Bank continued to review the statutory reserve requirements in line with the
tight monetary policy stance. To this effect, the statutory reserve requirements on
both local and foreign currency demand and call deposits were standardised to
15% in September 2023, while savings and time deposits were maintained at 5%.
The reserve requirements continue to play a key role in mopping up liquidity and
supporting financial stability in the economy.

Foreign Exchange Inflows
22. The Bank’s foreign currency management has continued to support the generation
of foreign currency in the economy. Reflecting these developments, the country’s
foreign currency receipts have remained high compared to historical averages,
notwithstanding the marginal decline of 3.7% in 2023 compared to 2022 as shown
in Table 2.

Table 2:Total Foreign Currency Receipts (US$ millions)
Type of Receipts

%
Contribu
tion

%
Contribu
tion
%
Change

(US$)
(US$)
Export Proceeds

International
Remittances

Diaspora
Remittances

NGOs Remittances

Loan Proceeds (Private)

Income receipts

Foreign Investment

TOTAL


Source: RBZ, 2024

23. Foreign currency inflows have shown signs of strong recovery during the first two
months of 2024. The foreign currency receipts for January and February 2024
amounted to US$2.2 billion compared to US$1.8 billion received during the same
period in 2023, representing a 23% increase, driven by strong exports and
remittances.

Money Market Liquidity
24. The Bank continued with its tight monetary policy stance during the past eight
months, with excess liquidity being mopped through the issuance of Nonnegotiable Certificates of Deposit (NNCDs). The Bank tightened the open market
operations to mop-up excess liquidity by introducing 7, 14, 21 and 31-day maturity
buckets for NNCDs in August 2023. In this regard, the level of NNCDs fluctuated
between ZW$251 billion and ZW$1.1 trillion during the past eight months.

25. Further efforts to manage liquidity saw the Bank issuing RBZ instruments as
collateral instead of cash cover for foreign currency structures undertaken with
banks.

The Auction System
26. In 2023, the Bank consolidated the Main Auction and the Micro, Small, and
Medium Enterprises (MSMEs) Auction into a Retail Foreign Exchange Auction
system with a weekly maximum limit of US$5 million. The Bank successfully
held 48 Retail Auctions in 2023 bringing the cumulative total to 172 since
inception in June 2020 to 12 January 2024, when the Auction System was
discontinued.

27. The Bank allotted a total of US$410.2 million in 2023 under the retail auction
system, representing around 70.2% of total bids submitted. Cumulative allotments
of the retail auction system since its inception in July 2020 amounted to US$4.12
billion by the time the Auction was discontinued, as shown in Table 3.

Table 3: Retail Foreign Exchange Auctions as of 12 January 2024
Date
US$ Total Bids
US$ Allotted
Share of
Allotted

645,295,466.94
624,933,976.75
96.8%

2,031,648,018.52
1,971,446,836.20
97.0%

1,220,873,179.99
1,114,154,170.51
91.3%

583,189,900.56
410,186,516.39
70.2%
GRAND
TOTAL
4,481,006,566.01
4,120,721,499.85
91.9%


28. In 2023, raw materials dominated the allotments accounting for US$188.8 million,
which was 51% of total allotments. Machinery and equipment were second at 17%
with an allotment of US$61.47 million. The residual 32% went towards payment
for consumables, pharmaceuticals, and other critical needs of the economy.

Wholesale Foreign Exchange Auction System

29. Since the introduction of the wholesale foreign exchange auctions on 7 June 2023,
the Bank held 34 auctions. Table 4 shows developments in the wholesale auction
market.

Table 4: Wholesale FX Auction Results – 12 January 2024
Date
Bids
Received
US$ Total Bids
US$ Allotted
Share of
Allotted
June-23

67,379,364.00
59,569,210.00
88.4%
July-23

66,591,250.00
58,102,450.00
87.3%
Aug -23

86,883,231.96
84,451,231.96
97.2%
Sept -23

75,388,562.05
74,206,462.05
98.4%
Oct -23

89,919,718.96
89,919,718.96
100.0%
Nov- 23

68,808,762.08
66,646,262.08
96.9%
Dec - 23

33,548,345.86
32,048,345.86
95.5%
Total

488,519,234.91
464,943,680.91
95.1%

30. Cumulatively, the Bank allotted US$464.9 million, under the Wholesale Foreign
Exchange Auction System, representing around 95.1% of total bids submitted. The
Bank has, however, also delayed the settlement of the Wholesale auction of around
US$80.9 million since discontinuation of the Auction System.

31. The Bank also availed US$20.2 million to the Bureaux de Change to facilitate
formal access to foreign currency by individuals, and small to medium-scale
enterprises.

SECTION THREE

RECENT ECONOMIC AND INFLATION DEVELOPMENTS


Global and Regional Economic Developments
32. Global growth is now forecasted to remain relatively stable at 3.1% in 2024, an
improvement from the initially anticipated 2.9% on account of improved growth
prospects in advanced economies. The projected global growth is well below the
historical (2000–19) average of 3.8%. Advanced economies are expected to slow
from 1.5% in 2023 to 1.4% in 2024, on account of both the tight fiscal and
monetary policies which are impacting growth. Emerging markets and developing
economies are projected to maintain a 4% growth in 2024. Sub-Saharan Africa is
projected to grow by 3.8% in 2024 from an estimated growth of 3.1% in 2023.

33. The intensifying geo-political conflicts and the growing intensity and frequency
of extreme weather events coupled with the tight global financial conditions driven
by the need to contain inflation, particularly in advanced economies, have
increased the underlying global risks and vulnerabilities and may further impact
growth in the outlook period.

Table 5: Global Growth Projections (%)

World Output
3.5
3.1
3.1
Advanced Economies
2.6
1.6
1.5
USA
1.9
2.5
2.1
Euro Area
3.4
0.5
0.9
Emerging Markets and
Development Economies (EMDEs)
4.1
4.1
4.1
China
3.0
5.2
4.6
Sub-Saharan Africa
4.0
3.3
3.8
South Africa
1.9
0.6
1.0
Zimbabwe
6.5
5.5
3.5
Source: IMF, World Economic Outlook, January 2024

Global Inflation
34. Global inflation is forecast to decline steadily, from 6.9% in 2023 to 5.8% in 2024,
due to tight monetary policy, coupled with lower international commodity
prices. As a result, most countries are now winding down the policy tightening
cycles which have reached a plateau, prompting most central banks to keep policy
rates unchanged.

35. Risks to the outlook are more balanced than they were six months ago on account
of the resolution of US debt ceiling tensions and the decisive action taken by the
Swiss and US authorities, to contain financial turbulence. The likelihood of a hard
landing has, therefore, receded. The balance of risks to global growth has,
however, tilted to the downside. More climate and geopolitical shocks could cause
additional food and energy price spikes.

36. The intensifying geoeconomic fragmentation could constrain the flow of
commodities across markets, causing further price volatility and complicating the
green transition. In particular, the disruption of shipping in the Suez Canal and the

Red Sea creates uncertainty and could result in delays in the delivery of goods as
ships reroute to alternative and much longer routes, thus, pushing up the shipping
costs. Economies in Europe are concerned that this could trigger another episode
of rising inflation.

Real Sector Developments

37. In 2023, the domestic economy is estimated to have grown by 5.5%, a slowdown
from 6.5% realised in 2022. The growth was 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.

38. The mining sector, which has become the biggest contributor to foreign currency
receipts 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. Gold deliveries to Fidelity Gold
Refinery (FGR) amounted to 30,106.71 kilograms in 2023 despite a slowdown in
deliveries in the first and second quarters of the year. Cumulative gold deliveries
to FGR by the end of 2023 are shown in Table 6.

Table 6: Cumulative Gold Deliveries to FGR for 2023 (kg)

1st
Quarter
2nd
Quarter
3rd
Quarter
4th
Quarter
Total 2023
Primary
producers/kg
2,514.44
3,005.54 3,109.74 2,815.49
11,445.21
Small Scale
producers/kg
3,679.64
4,981.40 5,175.13 4,825.32
18,661.50
Total

6,194.08
7,986.94 8,284.87 7,640.81
30,106.71
Source: FGR, 2024

39. Small scale producers remain the major producers accounting for 62% of the
deliveries whilst primary producers accounted for 38%.

40. In 2024, the El Nino-induced drought will significantly weigh down economic
growth prospects. The drought brought on by El Nino, which has proved to be
more severe than envisaged, is predicted to have a detrimental effect on the growth
trajectory of the domestic economy. The 2023–24 summer crop, which was largely
fair in January 2024, has been significantly negatively impacted by the dry spell
and high temperatures that have been prevalent since the beginning of February
2024. The direction of domestic growth will also be adversely impacted by a
downturn in commodity prices and a reduction in aggregate demand. Other
sectors, including tourism and construction will, however, continue to grow
favourably and even contribute to the resilience of the economy.

Inflation Developments
41. Inflation pressures dissipated from June 2023 because of bold monetary and fiscal
measures implemented by both the Bank and Government. The measures 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. These measures
resulted in tight liquidity in the market which gave rise to benign inflation
conditions. As a result, annual inflation decelerated from 30.9% in June 2023 to
17.8% in October 2003. Annual inflation, however rebounded to 26.5% in

December 2023 and remained elevated at 47.6% in February 2024 driven by the
weakening of the exchange rate, as shown in Figure 1.

Figure 1: Annual Inflation Profile (%)

Source: ZIMSTAT, 2024

42. Month-on-month inflation also declined from a peak of 12.10% in June 2023 to
-1.3% in August 2023. Driven by the exchange rate volatility, the month-on-month
inflation rebounded to 4.7% in December 2023 and 5.4% in February 2024. Figure
2 shows the trend in month-on-month inflation since December 2021.

Jul-22
Sep-22
Nov-22
Jan-23
Mar-23
May-23
Jul-23
Sep-23
Nov-23
Jan-24
Mar-24
All Items
Food and non alcoholic beverages
Non food

Figure 2: Monthly inflation January 2022 to December 2023 (%)

Source: ZIMSTAT, 2023

43. Monthly food inflation fell from a peak of 18.23% in June 2023 to -1.8% in August
2023 and rebounded to 15.01% in December 2023, before decelerating to 9.83%
in February 2024. Food inflation exhibited a high volatility in 2023, attributed to
speculative pricing and greed inflation which led to Government lifting restrictions
on imports of some basic food items and grain.

44. Monthly non-food inflation which also fell from 9.53% in June 2023 to -1.12% in
August 2023, before reaching 2.90% by December 2023, was largely driven by
housing, water, electricity, gas, and other fuels. The overly low monthly inflation
in August 2023 was attributed to the appreciation of the exchange rate on both the
parallel and interbank markets due to tight liquidity in the market. The non-food
inflation stood at 2.98% in February 2024 and slightly increased to 3% in March
2024.

Reserve Money Developments
45. Reserve money stock stood at ZW$2.021 trillion as at December 2023, compared
to ZW$1.064 trillion recorded in June 2023. The increase largely reflected the
expansion of ZW$748.44 billion in statutory reserves. The expansion in statutory
-5
-2

Dec-21
Mar-22
Jun-22
Sep-22
Dec-22
Mar-23
Jun-23
Sep-23
Dec-23
Mar-24
Food and non alcoholic beverages
Non food
All Items

reserves was on the back of increases of ZW$570.05 billion and ZW$350.96
billion in foreign and local currency statutory reserves, respectively. Statutory
reserves, both in local and foreign currency, constituted about 98% of total reserve
money, as shown in Figure 3.
Figure 3: Components of Reserve Money as at the end December 2023

Source: RBZ, 2023


Local Currency Statutory Reserves
46. The local currency statutory reserve balances increased from ZW$190.38 billion
on 3 July 2023 to ZW$594.82 billion as of 29 February 2024. The increase in the
statutory reserve balances partly reflected the change in the reserve requirement
ratio as well as the growth in the deposit base. The Bank will continue to adjust
the ratios in line with the thrust of monetary policy.

Foreign Currency Statutory Reserves
47. The Bank standardized statutory reserve requirements on all deposits by an upward
adjustment on the ratio for foreign currency demand and call deposits to 15% and
maintaining 5% for time deposits in September 2023. As a result, foreign currency
statutory reserve balances increased from US$152.86 million on 8 September 2023
Currency Issued
0.78%
FCA - Statutory
Reserves
71.34%
ZWL - Statutory
Reserves
26.40%
RTGS Balances
1.48%

to US$215.96 million as of 29 February 2024. The Bank will continue to monitor
changes in the deposit base and respond with policy adjustments accordingly.

Broad Money Developments
48. Broad money (M3)1 amounted to ZW$18.870 trillion as at end-December 2023,
compared to ZW$14.271 trillion recorded in June 2023. In January 2024, broad
money (M3) stock stood at ZW$29.248 trillion. The increase largely reflected an
expansion of ZW$3.176 trillion in transferable deposits. The money stock was
composed of foreign currency deposits, accounting for 83.01%, local currency
deposits constituting 16.94%, and local currency in circulation, 0.05%.

Figure 4: Monetary Developments (ZW$ Billion)

Source: Reserve Bank of Zimbabwe, 2023

49. On an annual basis, broad money grew by 708.87% in December 2023, from
ZW$2.338 trillion in December 2022. The growth was largely driven by an
increase of ZW$12.824 trillion in foreign currency deposits. The growth in foreign
currency deposits was on the back of real expansion in foreign currency accounts
coupled with exchange rate depreciation.


1 Provisional


Jan-23
Feb-23
Mar-23
Apr-23
May-23
Jun-23
Jul-23
Aug-23
Sep-23
Oct-23
Nov-23
Dec-23
Jan-24
Percent
ZW$ Billion
Foreign Currency Component
Local Currency Component
Annual Growth

50. The annual broad money growth in local and foreign currency is shown in Table
7.
Table 7: Components of Money Supply Growth

LC component
(ZW$ billion)
Annual
growth
FC
component
(ZW$ billion)
Annual
growth
Dec 2022

Mar 2023

Jun 2023

Sep 2023

Dec 2023

Jan 2024

Source: Reserve Bank of Zimbabwe, 2024

51. On the asset side, annual growth in M3 largely reflected nominal changes in credit
to the private sector and net claims on Government of ZW$9.948 trillion
(914.08%) and ZW$3.598 trillion (758.12%), respectively.

Figure 5: Contributions to Money Supply Growth (%)

Source: Reserve Bank of Zimbabwe, 2024
-200

Jan-22
Feb-22
Mar-22
Apr-22
May-22
Jun-22
Jul-22
Aug-22
Sep-22
Oct-22
Nov-22
Dec-22
Jan-23
Feb-23
Mar-23
Apr-23
May-23
Jun-23
Jul-23
Aug-23
Sep-23
Oct-23
Nov-23
Dec-23
Jan-24
Net Claims on Gvt
Claims on Pvt Sector
Residual of OIN and NFA
Other Sectors
Annual Growth

Balance of Payments Developments
52. The Bank’s preliminary estimates point to the current account balance having
narrowed to a surplus of approximately US$125.6 million in 2023, compared to a
surplus of US$305.0 million recorded in 2022. This followed a widening of the
merchandise trade deficit, largely driven by relative growth in imports in the face
of moderating exports as most global commodity prices weakened. The current
account balance was further weighed down by services and primary income
accounts that also registered deficits. Nevertheless, remittances and other transfers
(secondary income flows) continued to demonstrate resilience.


Figure 6: Current Account Developments (US$ millions)

Source: RBZ, 2024

-600
-400
-200

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

Merchandise Exports
53. Merchandise exports are estimated to have decreased by 0.8%, from US$7.0
billion in 2022 to US$6.9 million in 2023, largely weighed down by subdued
mineral exports. The decline in mineral exports was, however, partially offset by
increases in agricultural and manufactured exports.

54. During the year under review, mineral exports, which constitute about 80% of the
country’s merchandise exports, declined by 7.0% to US$5.2 billion, from US$5.5
billion in 2022.

Platinum Group of Metals (PGMS)
55. The decrease in mineral exports was predominantly caused by the continuous
decline of key commodity prices, primarily influenced by the diminished global
growth prospects. Notably, palladium and rhodium prices experienced sharp
contractions during the period despite the stability of platinum prices, leading to a
decreased export value for the platinum group of metals (PGMs), as shown in
Figure 7.


Figure 7: PGMs Prices (US$/Ounce)

Source: Johnson Matthey Database


03-Feb-17
03-Jun-17
01-Oct-17
29-Jan-18
29-May-18
26-Sep-18
24-Jan-19
24-May-19
21-Sep-19
19-Jan-20
18-May-20
15-Sep-20
13-Jan-21
13-May-21
10-Sep-21
08-Jan-22
08-May-22
05-Sep-22
03-Jan-23
03-May-23
31-Aug-23
29-Dec-23
Platinum
Palladium
Rhodium (RHS)

56. The price decline for PGMs was mainly attributable to abundant supplies in the
face of deteriorating global macroeconomic conditions which generated subdued
demand. The decline in demand also emanated from increased substitution in the
automotive and glass industries, favouring alternative metals over palladium and
rhodium. As a result, exports of PGMs witnessed a substantial decline of 36.9%,
in value terms, from US$2.2 billion in 2022 to US$1.4 billion in 2023.

Gold Exports
57. While gold exports benefitted from higher global prices amid safe-haven demand,
they were weighed down by the more significant volume decline caused by lower
production during 2023. Gold deliveries to Fidelity Gold Refinery (FGR) were 30
106.7 kg during 2023, 14.7% lower than the 35 280.1 kg delivered in 2022, as
shown in Figure 3. The decline in deliveries was due to reduced output occasioned
by power outages and attendant disruptions from heavy rains, which negatively
impacted on mining operations during the early months of the year.

58. In addition, the domestic gold pricing framework, affected by exchange rate
misalignments also contributed to the decline in deliveries to FGR from smallscale miners. Gold exports are thus estimated to have declined by approximately
11%, from US$1 997.8 million in 2022 to US$1 784.2 million in 2023.

Figure 8: Gold Purchases (kgs) and Price (US$/Ounce)
Source: Fidelity Gold Refinery, 2024

Lithium Exports
59. The Zimbabwean lithium industry has witnessed significant capital investments
due to the global transition to clean energy. Various projects are underway in the
country, ranging from resource evaluation to commissioning stages. Notable
production has already commenced at Bikita Minerals (Sinomine), Prospect
Lithium Zimbabwe (formerly Acadia), Sabi Star (Maxi Mindi), Kuvimba
(Sandawana), and Zulu Lithium. As a result of these developments, lithium
exports surged by 854.7%, from US$70.6 million in 2022 to US$674.0 million in
2023.

Agriculture Exports
60. Agriculture exports grew by 24.9%, from US$1 067.4 million in 2022 to US$1
333.1 million in 2023. The positive trend was mainly driven by the exceptional
performance of tobacco, sugar, and crocodile hides. Tobacco exports increased by
27.8%, reaching U$1 183.8 million in the period under review, compared to
US$926.1 million in 2022. This followed a very good season during which the

Jan
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
US$/Ounce
Kgs

2022[RHS]
2023[RHS]

country produced a record high 297 million kilograms in 2023, compared to 211
million kilograms produced in 2022.

Manufactured Exports
61. The year 2023 witnessed a notable increase of 19.1% in manufactured exports to
US$430.7 million, from US$361.8 million recorded in 2022. This was primarily
driven by the significant rise in tobacco cigarette exports, which saw a remarkable
surge of 64.1% from US$64.5 million in 2022 to US$105.9 million. Additionally,
the export of refined sugar posted a substantial growth of 46.2% to US$28.3
million in 2023, from US$19.4 million in 2022.

62. The growth of sugar and cigarette exports was predominantly fuelled by improved
access to foreign markets and the efforts of industry players in the respective
sectors towards developing external markets. However, the competitiveness of
manufactured exports continued to be hampered by challenges such as high
production and market development costs and obsolete machinery and equipment.

Merchandise Imports
63. During 2023, merchandise imports are estimated to have risen by 4.9% to US$8
527.8 million, from US$8 131.8 million in 2022. Increased fuel, machinery,
electricity, and grain imports drove the growth. As the economy expands, its
capacity to accommodate imports that support the production process also grows.

Foreign Payments Performance
64. Foreign payments were mainly channelled towards the importation of raw
materials and capital goods which are critical in sustaining industry capacity
utilization. In addition, capital remittances increased significantly by 51% driven
by portfolio disinvestments and external loan repayments. Table 8 shows foreign
payments by category.

Table 8: Foreign Payments by Category in US$ Millions (Jan –Dec 2023)
Category

%
Variance
Contribution

Contribution

Merchandise Imports
(excl. energy)

- Raw Materials &
Intermediate Goods

- Capital Goods

- Consumption &
Manufactured Goods

Energy (Fuel &
Electricity)

- Fuel

- Electricity

10%
2%
2%
Service Payments

8%
10%
10%
- Technical, Professional
& consultancy

-2%
5%
5%
- Software

27%
1%
1%
- Other (tourism, edu,
freight etc)

17%
4%
4%
Income Payments
(Profits, Dividends)

-40%
6%
4%
- Dividends

-60%
5%
2%
- Interest Payments

146%
0.20%
0.40%
- Other (Salaries, Expats,
Rental)

10%
1%
1%
Capital Remittances
(Outward)

51%
7%
10%
- External Loan
Repayments

58%
6%
8%
- Disinvestments

94%
0.50%
0.90%
- Foreign Investment

-10%
0.98%
0.80%

Category

%
Variance
Contribution

Contribution

Other Payments

47%
2.00%
2.60%
- Card Payments

46%
2%
2.24%
- Refunds

48.2%
0.30%
0.41%
Total

Source: RBZ, 2024

65. Food imports registered a 15.0% increase, from US$519.9 in 2022 to US$597.9
million in 2023, driven by growth in grain imports, notably, maize, rice, and wheat.
While the country’s wheat production has significantly gone up, the country
continues to import hard wheat for blending. Lower import prices for crude soya
oil, edible oils, and fertilisers, however, moderated the overall import bill.

Services Trade
66. Services exports increased by 0.75%, from US$453.3 million in 2022 to US$456.7
million in 2023 driven by the continued recovery in the tourism sector, following
the Covid-19 induced disruptions. On the other hand, services imports rose by
9.5%, from US$1 436.8 million in 2022 to US$1 573.5 million in 2023, largely on
account of growth in travel, transport, and other business services imports. Freight
services increased in line with growing merchandise imports.

Secondary Income Flows
67. Secondary income inflows increased by 7%, from US$3.080 billion in 2022 to
US$3.297 billion in 2023. The increase was due to higher inward remittances from
the diaspora. Personal transfers increased by 9.7% to US$2.162 billion in 2023,
from US$1.971 billion in 2022. Diaspora remittances through the official channel
amounted to US$1.873 billion, a 16% increase from the US$1.617 billion received
during the same period in 2022.

68. International remittances received through the normal banking system on behalf
of International Organizations (NGOs) amounted to US$1,136 million
maintaining the same level as the previous year.

Stock Market Developments
69. The period June 2023 to December 2023, was characterised by mixed trading, with
the Zimbabwe Stock Exchange (ZSE) registering some losses in June and July
before recovering to close the year in a bearish trend.

70. The All Share, Medium Cap and Small Cap indices closed the year at 210 833.92
points, 920 516.25 points and 5 483 703.77 points, compared to June 2023
positions of 171 408.90 points, 436 363.92 points and 1 911 327.14 points,
respectively. The Top 10 Index, however, declined from 93 034.57 points to 90
085.91 points.

71. The resource index also added 89.11% to close at 145 542.27 points during the
period under review. On a year-on-year basis, the All Share, Top 10, Medium Cap
and Small Cap indices gained 981.54%, 631.74%, 2 412.16% and 1 113.06%, from
19 493.85 points, 12 311.13 points, 36 642.44 points and 452 056.95 points
recorded in the comparable period last year, respectively. In the same vein, the
mining index also added 471.03%, from 25 487.77 points recorded in December
2022.

72. Figure 9 shows the developments of the ZSE All Share, Top 10 and Mining indices
for the period December 2022 to December 2023.

Figure 9: ZSE All Share, Top 10 and Mining Indices


Source: Zimbabwe Stock Exchange, 2024

Market Capitalisation
73. As a result of improved trading activity, the market gained 20.20%, or ZW$2.825
trillion worth of capitalization to close at ZW$16.812 trillion, compared to
ZW$13.987 trillion recorded in June 2023. On a year-on-year basis, the ZSE
capitalization added 722.20%, from ZW$2.045 trillion recorded in December
2022.

74. Figure 10 shows the evolution of market capitalization for the period 31 December
2022 to 31 December 2023.


28-Feb-23
31-Mar-23
30-Apr-23
31-May-23
30-Jun-23
31-Jul-23
31-Aug-23
30-Sep-23
31-Oct-23
30-Nov-23
31-Dec-23
31-Jan-24
29-Feb-24
All Share Index
Top 10 Index
Mining Index

Figure 10: ZSE Market Capitalisation (ZW$ billion)

Source: Zimbabwe Stock Exchange, 2024

Victoria Falls Stock Exchange (VFEX)
75. Negative investor sentiments on the VFEX dominated the second half of 2023. In
line with these developments, the VFEX All Share index lost 7.25% close at 70.64
points, from 76.17 points recorded in June 2023. On an annual basis, the VFEX
All Share index lost 25.50%, from 94.83 points recorded in December 2022.

Figure 11: Victoria Falls Stock Exchange All Share Index

Source: Victoria Falls Stock Exchange, 2024


31-Dec-22
31-Jan-23
28-Feb-23
31-Mar-23
30-Apr-23
31-May-23
30-Jun-23
31-Jul-23
31-Aug-23
30-Sep-23
31-Oct-23
30-Nov-23
31-Dec-23

31-Dec-22
31-Jan-23
28-Feb-23
31-Mar-23
30-Apr-23
31-May-23
30-Jun-23
31-Jul-23
31-Aug-23
30-Sep-23
31-Oct-23
30-Nov-23
31-Dec-23

Market Capitalization
76. During the second half of 2023, market capitalisation declined by 6.02%, or
US$77.39 million to US$1.21 billion, compared to US$1.29 billion recorded in
the first half of 2023. On an annual basis, however, market capitalization added
172.13%, from US$0.44 billion recorded in the comparable period in 2022.

Figure 12: VFEX Market Capitalisation in billions of US$.

Source: Victoria Falls Stock Exchange, 2024

Foreign Exchange Market Developments
77. The introduction of the wholesale foreign exchange auction, coupled with other
monetary and fiscal policy measures, resulted in the parallel market premium
declining to below 30% for the greater part of the second half of 2023. The trend,
however, reversed when the premium widened to above 50% in December and
January 2024 driven by excessive demand for foreign exchange. The parallel
market premium has declined to below 20% since February 2024 as shown in
Figure 13.


31-Dec-22
31-Jan-23
28-Feb-23
31-Mar-23
30-Apr-23
31-May-23
30-Jun-23
31-Jul-23
31-Aug-23
30-Sep-23
31-Oct-23
30-Nov-23
31-Dec-23

Figure 13: Exchange Rate Developments

Source: Reserve Bank of Zimbabwe, 2024

12-Oct
19-Oct
26-Oct
2-Nov
9-Nov
16-Nov
23-Nov
30-Nov
7-Dec
14-Dec
21-Dec
28-Dec
4-Jan
11-Jan
18-Jan
25-Jan
1-Feb
8-Feb
15-Feb
22-Feb
29-Feb
7-Mar
14-Mar
21-Mar
28-Mar

SECTION FOUR

CONDITION AND PERFORMANCE OF THE BANKING SECTOR

Condition and Performance of the Banking Sector
78. The banking sector has witnessed general stability and continues to be safe and
sound. The sector has demonstrated resilience to shocks emanating from the
dynamic operating environment and remains a key catalyst for inclusive and
sustainable economic growth. Stability in the sector is attributed to a raft of
stabilisation measures by fiscal and monetary authorities.

Banking Sector Architecture
79. The architecture of the banking sector remains unchanged as shown in Table 9.
Table 9: Banking sector architecture
Type of Institution
Number
Commercial Banks

Building Societies

Savings Bank (POSB)

Total Banking Institutions

Non-Bank 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
80. Banking sector performance remained robust with adequate capital and liquidity
buffers, satisfactory asset quality and sustained profitability, among other key
financial soundness metrics as depicted in Table 10.
Table 10: Financial Soundness Indicators
Key Indicators
Benchmark Dec-22
Mar-23
Jun-23
Sep-23
Dec-23
Total Assets (ZW$
trillion)

Total Loans &
Advances (ZW$
trillion)

Net Capital Base
(ZW$ trillion)

Core Capital (ZW$
trillion)

Total Deposits (ZW$
trillion)

Net Profit (ZW$
trillion)

Return on Assets

Return on Equity

Capital Adequacy
Ratio

Tier 1 Ratio

Loans to Deposits
Ratio

NPLs Ratio

Liquidity Ratio

Source: Reserve Bank of Zimbabwe, 2024

Banking Sector Capitalisation
81. As at 31 December 2023, the banking sector was adequately capitalized and all
banking institutions complied with the prescribed tier 1 and capital adequacy ratios
of 8% and 12%, respectively, as shown in Table 11.

Table 11: Banking Sector Capitalisation Levels by Institution
Institution
Capital
Adequacy Ratio
Tier 1 Ratio
Commercial Banks
AFC Commercial Bank
31.22%
29.00%
BancABC
33.32%
24.37%
First Capital Bank
33.35%
23.67%
CBZ Bank
23.13%
15.26%
Ecobank
39.24%
33.66%
FBC Bank
16.86%
13.49%
Nedbank
28.80%
23.60%
Metbank
69.13%
69.13%
NMB Bank
29.29%
28.00%
Stanbic Bank
25.27%
21.71%
Standard Chartered Bank
27.94%
15.82%
Steward Bank
41.33%
31.50%
Time Bank
85.87%
57.25%
ZB Bank
21.87%
20.60%
Building Societies
CABS
37.49%
24.98%
FBC Building Society
31.94%
26.94%
National Building Society
14.32%
14.18%
ZB Building Society
56.68%
56.60%
Saving Banks
POSB
44.03%
27.39%
Source: Reserve Bank of Zimbabwe, 2024

82. Aggregate core capital increased from ZW$5.05 trillion as at 30 June 2023 to
ZW$6.31 trillion as at 31 December 2023 due to organic growth. Retained
earnings from some banking institutions were largely driven by revaluation gains
from investment properties and translation gains from foreign currencydenominated assets.
83. Banking institutions are currently pursuing various measures to bolster their
capital levels as part of ongoing efforts to ensure that they have adequate economic
capital commensurate with their risk profiles and to ensure ongoing compliance
with minimum capital requirements.
84. External audits of banking institutions for the year ended 31 December 2023 are
currently underway. The Bank will leverage on the audit reports to conduct capital

verification examinations to confirm the banks’ declared capital positions as at 31
December 2023.
Banking Sector Asset Structure
85. Total banking sector assets increased from ZW$27.28 trillion as at 30 June 2023
to ZW$34.41 trillion as at 31 December 2023 as shown in Figure 14.

Figure 14:Asset Mix as at 31 December 2023

Source: Reserve Bank of Zimbabwe, 2024

Asset Quality
86. Banking sector asset quality remains satisfactory. As at 31 December 2023, the
aggregate non-performing loans to total loans ratio (NPL) of 2.09% was within the
internationally acceptable threshold of 5%. The ratio improved from 3.62% as at
30 June 2023 reflecting continued sound credit risk management practices and
strong internal controls within the banking sector. Figure 15 shows the trend in the
level of NPLs from December 2020 to December 2023.
Domestic Notes and
Coins
8.39%
Balances with
Central Bank
14.88%
Balances with
Domestic Banking
Institutions
2.21%
Assets in
Transit
0.11%
Balances with
Foreign Institutions
8.05%
Securities and
Investments
14.04%
Loans, Advances,
Bankers
Acceptances and
Leases
29.26%
Foreign Claims
(Including Bills of
Exchange)
0.76%
Repossessed
Properties / Assets
0.09%
Fixed Assets
11.61%
Other Assets
6.80%
Off-Balance Sheet
Items
3.80%

Figure 15: Trend in Non- Performing Loans
Source: Reserve Bank of Zimbabwe, 2024

Banking Sector Loans and Advances
87. As at 31 December 2023, aggregate banking sector loans and advances amounted
to ZW$11.26 trillion, representing a 10.50% increase from ZW$10.19 trillion
reported as at 30 June 2023. The increase was largely attributed to an increase in
foreign currency-denominated loans, which accounted for 84.67% of the sector’s
loan book. The banking sector continued to support the funding requirements of
the productive sectors of the economy as evidenced by loans to the productive
sectors, which constituted 72.68% of total loans as at 31 December 2023.
Figure 16 shows the sectoral distribution as at 31 December 2023.


Dec-20
Mar-21
Dec-21
Jun-22
Sep-22
Dec-22
Mar-23
Jun-23
Sep-23
Dec-23
NPL Ratio
Benchmark

Figure 16: Sectoral Distribution of Loans as at 31 December 2023

Source: Reserve Bank of Zimbabwe, 2024

Banking Sector Profitability
88. The banking sector remains profitable. All banking institutions registered profits
with reported aggregate profits of ZW$5.77 trillion for the year ended 31
December 2023, compared to ZW$503.13 billion reported in 2022. The growth
in the banking sector income largely emanated from non-interest income, which
accounted for 84.27% of total income (ZW$10.45 trillion) as at 31 December
2023. The income mix for the sector is depicted in Figure 17.


Consumptive,
20.43%
Other, 6.89%
Agricultural,
14.46%
Manufacturing,
12.57%
Commercial,
7.89%
Mining,
11.32%
Dstribution,
11.32%
Construction,
1.35%
Transport, 1.45%
Communication,
1.03%
Financial, 5.71%
Mortgage, 5.58%
Productive,
72.68%

Figure 17: Banking Sector Income Mix as at 31 December 2023

Source: Reserve Bank of Zimbabwe, 2024

89. The return on assets and return on equity ratios were 23.97% and 68.99% as at 31
December 2023, compared to 17.43% and 54.33% as at 31 December 2022,
respectively shown in Figure 18.
Figure 18: Returns on Assets and Earnings as at 31 December 2023

Banking Sector Deposits and Liquidity
Interest Income from
Loans Advances and
Leases
12.49%
Interest Income
on Balances with
Banking
Institutions
0.65%
Interest
Income on
Investments
and
Securities
Foreign
Exchange
9.88%
Fees and
Commission
19.58%
Gains on Sale of
Other Assets
(Excluding
Securities)
0.23%
Gains on Sale of
Held-to-Maturity
Securities
0.49%
Gains on
Revaluation of
Foreign Currency
Assets
25.17%
Gains on
Revaluation of
Investment
Properties
22.39%
Other NonInterest Income

Dec-20
Dec-21
Dec-22
Dec-23
Return on Assets
Return on Equity

90. Reflecting high stock of liquid assets, the banking sector’s average prudential
liquidity ratio was 60.33% as at 31 December 2023. The trend in the prudential
liquidity ratio from 31 December 2020 to 31 December 2023 is shown in Figure
19.
Figure 19: Prudential Liquidity Ratio Trend
Source: Reserve Bank of Zimbabwe, 2024

91. Total banking sector deposits continued on an upward trajectory from ZW$14.66
trillion reported as at 30 June 2023 to ZW$19.47 trillion as at 31 December 2023,
mainly driven by translation of foreign currency-denominated deposits due to
exchange rate movements. Foreign currency deposits accounted for 77.09% of
total deposits as at 31 December 2023. The trend of banking sector deposits over
the period 31 March 2022 to 31 December 2023 is shown in Figure 20.


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

Figure 20: Trend in Banking Sector Deposits

Source: Reserve Bank of Zimbabwe, 2024

Climate Risk Management
92. Climate risk management continues to be a key supervisory focus area for the
Bank. Thus, the Bank continues to institute a series of measures to improve
banking institutions’ risk management and supervisory practices pertaining to
climate-related risks.

93. Following the issuance of Guideline No.01-2023/BSD: Climate Risk Management
in April 2023, the Bank conducted a survey to assess progress made by financial
institutions in operationalizing the provisions of the Guideline. The results from
the survey show that most banking institutions have to date conducted some
assessments to determine the impact of climate risk on their balance sheets and
have developed climate risk management policies and put in place appropriate
governance arrangements, including board and senior management oversight.
Limited availability of climate-related data and climate stress testing capabilities
were noted as some of the challenges being faced. Against this background, the
Bank will continue to work closely with the banking sector and other relevant

31MAR-22
30-JUN-

30-SEP-

31-DEC-

31MAR-23
30-JUN-

30-SEP-

31-DEC-

ZW$ Billions

stakeholders in enhancing industry skills and capacity to manage climate-related
risks.
94. In December 2023, the Bank was accepted as a member of the Network for
Greening the Financial System (NGFS). The main objective of the NGFS is to
improve the global response required to meet the Paris Agreement's climate
change goals, as well as to improve the role of the financial system in risk
management and capital mobilization for green and low-carbon projects in the
context of ecologically sustainable development. It is envisaged that NGFS
membership will significantly positively impact the management of climaterelated risks in the country.

Liquidity Coverage Ratio Standard
95. Banking institutions are at various stages of developing and reinforcing requisite
policies, processes, models, and systems (including management information
systems) following the issuance of Prudential Standard No:02-2022/ BSD:
Guidance on the Implementation of the Liquidity Coverage Ratio (LCR) in
December 2022. The Bank has determined, from reports hitherto received from
banks, that the banking sector has sufficient liquidity to meet short-term
obligations as measured by the LCR.

96. Going forward, the Bank has noted the need to customise some of the LCR
parameters, taking cognizance of the domestic operating environment. As
previously communicated, the objective of the Standard is to promote the shortterm resilience of the liquidity risk profile of banking institutions.

Enhanced Risk Management Guideline
97. The Bank has enhanced Prudential Standard No. 1-2006/BSD Risk
Management taking cognisance of emerging risks such as Climate and Cyber
risks, as well as amplified risks on the back of dynamic domestic and global

operating landscapes. The reinforcements place greater emphasis on governance,
risk management arrangements, and processes, paying due regard to processes of
the Board and Senior Management oversight including risk culture and risk
appetite, compliance, and strategic risk management. The guideline will be issued
by 30 April 2024.

Review of Microfinance Licensing & Supervisory Framework
98. In line with the Reserve Bank’s mandate to provide supportive regulatory
interventions to ensure the microfinance sector continues to support
entrepreneurship development and improvement of livelihoods under the National
Financial Inclusion Strategy (NFIS) II, the Bank is in the process of reviewing the
current licensing and supervisory framework for both credit-only and deposittaking microfinance institutions to ease the licensing requirements and ensure
effective financial surveillance.
Performance of the Microfinance Sector
99. Microfinance institutions continue to play a significant role in promoting financial
inclusion and driving sustainable economic development. As at 31 December
2023, there were 238 registered microfinance institutions, comprising 230 creditonly microfinance institutions, and eight (8) deposit-taking microfinance
institutions (DTMFIs). Seven (7) out of the total eight (8) DTMFIs were
operational, while one (1) was still in the process of putting together the requisite
infrastructure to commence deposit-taking microfinance business.

Microfinance Outreach
100. The number of active clients accessing loans through microfinance institutions
increased by 12.21% from 298,023 as at 30 June 2023, up to 334,423 as at 31
December 2023. The industry also recorded an 8.88% increase in the number of
women accessing loans from 137,063 up to 149,235 as at 31 December 2023, and
the value of loans to female borrowers over the same period increased by 82.22%
from ZW$157.32 billion to ZW$286.67 billion as at 31 December 2023.

Microfinance Sector Capitalization
101. The microfinance sector registered a 32.77% increase in aggregate equity from
ZW$301.14 billion as at 30 June 2023 to ZW$399.83 billion as at 31 December
2023. The increase was attributable to organic growth, fresh capital injection by
some microfinance institutions’ shareholders and currency translation gains.

102. A total of 35 credit-only microfinance institutions were non-compliant with the
minimum capital requirements of ZW$ equivalent of US$25,000. The noncompliant institutions are putting in place re-capitalization strategies to comply
with the prescribed minimum capital requirements and enhance their capacity to
underwrite more meaningful business.

103. Four (4) out of seven (7) operational DTMFIs were non-compliant with the new
minimum capital requirement of ZW$ equivalent to US$5 million for deposittaking microfinance institutions. This was largely attributable to persistent losses
since inception by the respective DTMFIs, thereby depleting institutions’ capital.
The Bank continues to engage the institutions and shareholders of the noncompliant DTMFIs as they implement various capital-raising initiatives.

Loan Portfolio
104. Total loans for the microfinance sector increased by 78.93% from ZW$418.37
billion as at 30 June 2023, to ZW$748.60 billion as at 31 December 2023. The
aggregate industry total loans of ZW$748.60 billion comprised ZW$342.57 billion
(54.97%) for consumptive loans and ZW$337.13 billion (45.03%) for productive
loans. The sector registered a deterioration in the loan portfolio quality as reflected
by the portfolio-at-risk (>30 days) ratio of 10.43% as at 31 December 2023, up
from 7.20%. This underscores the need to enhance credit risk management within
the microfinance sector.

Profitability
105. The microfinance sector registered significant progress with an aggregate net
profit of ZW$402.64 billion for the year ended 31 December 2023, from
ZW$12.10 billion recorded during the comparable period in 2022. The increase
was largely attributed to the revaluation of trading assets held in foreign currency.

Deposits Mobilisation
106. Confidence in the deposit-taking microfinance subsector continues on an upward
trend as reflected by a 104.72% increase in deposits over the review period from
ZW$53.35 billion as at 30 June 2023 to ZW$109.22 billion as at 31 December
2023.

Sustainable Banking Practices
107. Sustainability has become a key factor in creating strong, resilient, and inclusive
financial institutions that contribute meaningfully to sustainable economic
development and greening of the financial sector. The Bank remains resolutely
focused on promoting the adoption of sustainable banking practices within the
financial services sector. It is against this background that the Bank continues to
work 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.

108. To date, 14 out of 19 banking institutions are participating under the SSCI and are
at various stages of implementation while more institutions have expressed interest
in undergoing the certification program.

NATIONAL FINANCIAL INCLUSION STRATEGY II IMPLEMENTATION
109. Financial inclusion remains a key priority area that facilitates positive wealth
creation and a key driver to sustainable and inclusive economic development,

towards the country’s 2030 Vision of an “Upper Middle- Income Economy”,
‘leaving no one and no place behind’.

Financial Literacy & Consumer Education
110. The main strategic vision of the National Financial Inclusion Strategy (NFIS) II is
to promote increased usage of financial services. Low levels of financial literacy,
including digital financial literacy, have contributed to lower uptake and usage of
financial services. In this regard, and as part of the implementation of NFIS II,
there is increased focus on financial literacy with the view to facilitate acquisition
of knowledge and skills that promote responsible financial behaviour and enables
consumers to make informed financial decisions.

111. The Bank, in collaboration with other stakeholders, is conducting financial literacy
programs on various platforms including, schools, women groups, churches,
businesspeople forums, and communities in the rural areas. Further, the Bank has
also embarked on financial inclusion campaigns and community engagements
across the country’s provinces through various platforms including the National
Development Strategy 1 programmes spearheaded by the Ministry of Finance,
Economic Development and Investment Promotion, and sensitisation outreach
programs on consumer rights and digital financial services, with Postal
Telecommunication Regulatory Authority of Zimbabwe (POTRAZ), Consumer
Council of Zimbabwe and Consumer Protection Commission of Zimbabwe.

112. In addition to financial literacy initiatives by the Bank, financial institutions were
urged to adopt the ‘finance plus’ approach to the provision of financial services
by combining financial services and products with non-financial services
incorporating financial literacy programs.

Financial Inclusion Indicators
113. Access to credit improved during the year ended 31 December 2023 as indicated
by the significant increase in the real value of loans to women, which registered a
90.50% increase from ZW$378.71 billion as at 30 September 2023, to ZW$721.43
billion as at 31 December 2023. The increase was partly attributed to the
operationalisation of the collateral registry system which facilitates the usage of
moveable assets particularly by women who previously lacked collateral to secure
funding from financial institutions.

114. As at 31 December 2023, loans to women accounted for 7.76% of total banking
sector loans, up from 4.48% in the previous quarter. In addition, real value of
loans to MSMEs and Youth increased from ZW$326.97 billion and ZW$278.49
billion as at 30 September 2023, to ZW$461.39 billion and ZW$292.85 billion as
at 31 December 2023, respectively.

115. The proportion of loans to MSMEs compared to total banking sector loans
increased from 3.87% to 4.96%, while the proportion of loans to Youth compared
to total banking sector loans marginally declined from 3.29% to 3.15% for the
same period.

116. The number of active bank accounts marginally declined from 8.02 million as at
30 September 2023, to 7.69 million as at 30 December 2023, whilst low cost
accounts increased from 3.5 million to 3.75 million during the same period. Table
12 below shows the trend in the movement of the financial inclusion indicators
during the review period.

Table 12: Financial Inclusion Indicators as at 31 December 2023

117. The Bank will continue to take a collaborative approach to the implementation of
NFIS II with the view to empowering all Zimbabweans towards building resilient
Indicator

Dec 22
March 23
June 2023
Sept 23
Dec 23
Number of Loans to MSMEs

Nominal Value of loans to
MSMEs (ZW$ Million)

Inflation-adjusted - Value of
loans to MSMEs (ZW$
Million)

Average loans to MSMEs as
% of total bank loans

Number of Loans to Women

Nominal Value of Loans to
Women (ZW$ Million)

Inflation-adjusted 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)

Inflation-adjusted 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)


and sustainable livelihoods through increased uptake and usage of appropriate,
affordable, sustainable and high quality formal financial services and products.

CREDIT INFRASTRUCTURE

Credit Information Sharing Environment
118. Credit information sharing among lending institutions, which is facilitated by the
Credit Registry and the private credit bureaus continued to make notable
contributions to the efficient operation of the credit markets, to financial inclusion
and financial sector stability over the year to 31 December 2023.

119. Financial institutions can now readily access comprehensive credit information
from the databases of the Credit Registry and the credit bureaus as part of the credit
screening and risk management strategies. This includes measures to strongly
mitigate against the risk accumulating non-performing loans. As at 31 December
2023, the credit reporting institutions in the country held a combined total of 22.44
million searchable records. The cumulative records per institution are indicated in
Figure 21.

Figure 21: Cumulative Loan Records per Credit Reporting Institution (ZW$m)

FCB
Credit Registry
XDS
Fincheck

Number of Loan Records (Millions)

120. Lending institutions are encouraged to search the different credit bureaus as they
hold different types of records which are important for lending decisions. The
distribution of enquiries across the credit reporting institutions is shown in Figure
22.
Figure 22: Distribution of Inquiries per Credit Reporting Institution

121. Statistics from the Credit Registry show an upward trend in the quarterly enquiries
as at 31 December 2023, having grown by 18.92% from 278,805 as at 31
December 2022 as shown in Figure 23.

Credit Registry
54.05%
FCB
41%
XDS
3%
Fincheck
2%

Figure 23: Credit Registry Usage Status on Quarterly Basis
Source: Reserve Bank of Zimbabwe, 2024

122. The distribution of loans to individual borrowers by age and gender in the Credit
Registry as at 31 December 2023 is indicated in Figure 24.
Figure 24: Distribution of Loans Age and Gender as at 31 December 2023


Mar-22
Jun-22
Sep-22
Dec-22
Mar-23
Jun-23
Sep-23
Dec-23
Number of Inquiries


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

Collateral Registry Update
123. The establishment of the Collateral Registry in November 2022 in terms of the
Moveable Property Interest Act [Chapter 14:35] marked a significant step in the
Bank’s efforts to enhance the credit infrastructure. The Collateral Registry serves
to facilitate commerce and industry by enabling individuals and businesses to
utilize their movable property as collateral to access credit. As at 31 December
2023, 57 institutional users were utilising the system including banks,
microfinance institutions, contract financiers, and law firms.

124. The Collateral Registry system recorded 1,204 active registered security interests
with a total loan amount of ZW$4.59 trillion as at 31 December 2023 as shown in
Figure 25.
Figure 25: Value of Registered Securities as at 31 December 2023


125. The number of security interest registrations has been on an upward trend since
inception, closing the year at 1204, as indicated in Figure 26.

ZW$1.60 trillion
ZW$7.39 billion
ZW$2.98 trillion
ZW$3.78 billion
ZW$0.00 trillion
ZW$0.50 trillion
ZW$1.00 trillion
ZW$1.50 trillion
ZW$2.00 trillion
ZW$2.50 trillion
ZW$3.00 trillion
ZW$3.50 trillion

BANKING
INSTITUTIONS
MICROFINANCE
INSTITUTIONS
LAW FIRMS
CONTRACT
FINANCIERS
PRINCIPAL AMOUNT (ZW$)
SECURITY INTEREST NOTICES
NUMBER OF SECURITY INTEREST NOTICES
PRINCIPAL AMOUNT (ZW$)

Figure 26: Number of Security Interest Notices as at 31 December


126. Movable assets accepted as collateral by lending institutions range from household
goods, private vehicles, trucks, agricultural equipment to shares as shown below.
Figure 27: Types of Collateral as at 31 December 2023

127. As at 31 December 2023, MFIs registered the highest number of security interest
searches as shown in Figure 28.

Dec-22
Jan-23
Feb-23
Mar-23
Apr-23
May-23
Jun-23
Jul-23
Aug-23
Sep-23
Oct-23
Nov-23
Dec-23

Household Goods
Private Vehicles
Trucks
Agriculture Equipment
NGCBs
Other
Bus
Construction Equipment
Industrial Equipment
Livestock
Manufacturing Equipment
Accession/Agreement
Stocks of Finished Goods
Account Receivable
Intellectual Property
Stock of Raw Materials
Bank Account
Fixtures
Future
Shareholdings

Figure 28: Searches by Client as at 31 December 2023


NATIONAL PAYMENT SYSTEMS DEVELOPMENTS
128. The payment system services sector comprising of 12 financial market
infrastructures (FMIs) and 24 participant banks, remained sound, and safe, and
recorded significant improvements. Aggregate digital payments transaction values
continued on an upward trajectory in 2023, increasing by a monthly average of
24%. Transaction volumes, however, declined by a marginal 1% monthly as
shown in Figure 29.

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

Figure 29: Digital Payments Transaction Values and Volumes (Jan-Dec 2023)

*Digital Payments Include RTGS, Card, Mobile Money, Mobile Apps, & Online platforms
**December 2023 statistics are estimates.

129. In 2023, a total of 736.84 million transactions valued at ZW$255.13 trillion were
processed through the national payment system.

Real Time Gross Settlement System (RTGS)
130. A total of 11.57 million transactions valued at ZW$161.86 trillion were processed
through the RTGS system in 2023. The SADC-RTGS system celebrated 10 years
of processing cross-border payments in 2023. Since inception, over 3.2 million
transactions valued at ZAR12.63 trillion have been settled on the platform.

131. In 2023, Zimbabwean commercial banks processed ZAR5.55 billion worth of
transactions on the SADC-RTGS system, an increase of 29% from 2022, while the
volume declined by 22% to 4,103 transactions.


Jan-23
Feb-23
Mar-23
Apr-23
May-23
Jun-23
Jul-23
Aug-23
Sep-23
Oct-23
Nov-23
Dec-23
Volumes in millions
Values in billions
Transaction Values in Billions (ZW$) [LHS]
Transaction Volumes in Millions [RHS]

Interoperability
132. The interoperability transactions values processed for retail digital transactions
continued to trend upwards, reaching ZW$342.96 billion by end of December
2023, as shown in Figure 30.

Figure 30: Interoperability Transactions: Values and Volume - Jan 23 to Dec 23


Access Devices and Points
133. All-access devices, except debit cards and internet banking subscribers, recorded
growth during the second half of 2023, as shown in Table 13.


31-Jan-23
22-Feb-23
16-Mar-23
7-Apr-23
29-Apr-23
21-May-23
12-Jun-23
4-Jul-23
26-Jul-23
17-Aug-23
8-Sep-23
30-Sep-23
22-Oct-23
13-Nov-23
5-Dec-23
27-Dec-23
Millions
Billions
Values LHS
Volumes RHS

Table 13: Payment Access Points and Devices as of December 2023
VOLUMES


%
CHANGE

Jul-23
Aug-23
Sep-23
Oct-23
Nov-23
Dec-23**
PAYMENTS SYSTEMS ACCESS POINTS
ATMs

-0.7%
POS

MPOS

PAYMENTS SYSTEMS ACCESS DEVICES
Debit Cards
6,443,812 5,824,038 5,400,225 5,431,127 5,526,738 5,609,639
-12.9%
Credit Cards

Prepaid
Cards

Mobile
Banking
Subscribers
8,305,879 8,209,582 8,146,645 8,120,539 8,912,045 9,313,087
12.1%
Internet
Banking
Subscribers

**December 2023 statistics are based on estimates.

Anti-Money Laundering and Counter Financing of Terrorism (AML-CFT)
134. The payment services sector has made considerable progress in strengthening
AML-CFT measures in line with international standards and regulatory
requirements. The Bank continues to implore the mobile money operators to
increase their compliance.

Cyber Security and SWIFT Customer Security Programme Self-Assessment
135. The widespread use of digital financial services platforms has increased the risks
of cyber-attacks. Financial services providers are encouraged to put in place robust
cyber security systems as enshrined in the Risk-based Cyber Security Guide for
Payment Services (2020). Institutions should also be alert to new and evolving
cyber threats.
136. Market players successfully implemented SWIFT Cybersecurity Controls within
the required timeframe with a record of 99% compliance.

Card, POS and ATMs EMV Compliance
137. The Bank is pleased to advise that the market has achieved 100% EMV
compliance for POS machines and 91% and 89% for ATMs and cards,
respectively. These efforts will go a long way towards reducing the cyber security
incidents related to card frauds.
138. The Bank urges the remaining few banks and two mobile money providers using
non-EMV compliant cards to expeditiously work towards full compliance.

SWIFT ISO 20022 Migration from MT Messages
139. The Bank is pleased with the work undertaken by the banking community towards
ensuring full compliance with the outstanding SWIFT Cross Border payment
processes for the ISO 20022 program. We urge all the banks to aim to migrate
fully during the first half of 2024.

New Initiatives
140. In line with its mandate to provide a conducive environment for Fintech
developments, the Bank received forty-six (46) applications on product initiatives
from both financial institutions and prospective payment system providers. The
applications comprised of 17 product additives and enhancements, 21 enquiries, 4
were referred to other regulators, 3 were not approved while 1 was work in
progress.

SECTION FIVE

NEW MONETARY POLICY STRATEGIC FOCUS AREAS

141. Government and the Bank have made significant strides in sustaining an optimal
currency mix in the multi-currency system. The exchange rate and inflation
volatilities experienced in the economy continue to threaten the prospects of the
local currency under the multi-currency system.
142. Given the above, the Bank is recalibrating its monetary policy framework to
address the current state of price and exchange rate instability in the economy.
This policy stance is informed by two strategic policy pillars of restoring price and
exchange rate stability, and re-monetising the local currency for it to serve its role
as a medium of exchange and a store of value. The policy also seeks to rebuild
market confidence and trust, as well as Bank policy credibility.
143. The Monetary Policy Strategic Focus Areas are as follows;
1. Currency and Exchange Rate Stability:

Currency and exchange rate instability has largely been driven by:
• High demand for foreign currency as a store of value.
• Reduced confidence due to continued currency volatility in recent months, and the
widening margin between the interbank and parallel market exchange rates.
• Reduced use of the local currency for domestic transactions.
• Lack of certainty and predictability on the exchange rate front.

In view of the above, the Reserve Bank will introduce a foreign exchange management
system that guarantees the successful restoration of currency and exchange rate stability.

2. Financial Sector Stability:

• The banking industry is safe and sound, with sufficient buffers for capital and
liquidity, good asset quality, and steady profitability.

• Accordingly, the Reserve Bank's oversight and financial surveillance framework
will be reinforced to improve the current state of the banking sector and foster a
culture of discipline and compliance.

3. Money Supply Growth:
• Unchecked base money growth causes inflation and undermines the stability of
exchange rates.
• With this framework, the Reserve Bank intends to strategically manage money
supply growth through a disciplined culture in sync with improved economic activity
and increased reserves in the form of gold and foreign currency balances.

4. Foreign Exchange Mobilisation and Reserve Accumulation:
• The Reserve Bank will consistently maintain a comfortable and steady buffer of
foreign reserves to ensure that the new currency is at all times fully covered by
reserves.
• Resource mobilisation and accumulation will be a key focus of the new monetary
policy framework.
• Financial surveillance will be strengthened in order to stop foreign exchange
leakages.

5. Promoting Increased Demand for the Local Currency

• The economy has, of late, been moving towards full dollarisation, as the US dollar
has continued to dominate the weaker ZW$, with over 80% of market transactions
now conducted in US dollars.
• Public outcry over excessive bank charges, problem of change, rejection of soiled
US$ notes, and inconvenience of small ZW$ denominations has rendered the ZW$
ineffective as a store of value and means of exchange.
• Increased demand for local currency will enhance its stability and role as a store of
value and medium of exchange.

• This Monetary Policy Statement has introduced new measures to increase demand
for the local currency.
NEW MONETARY POLICY MEASURES

144. Following the recalibration of the Bank’s policymaking framework, the New
Monetary Policy measures are intended to achieve the following objectives which
are consistent with regional and global best practices:
a) A solid and stable national currency.
b) A stable and sustainable exchange rate.
c) Robust policy credibility and restoration of market confidence.
d) A stable and sustainable macro economy as enshrined in Vision 2030 and
NDS1.


145. The new policy framework will be implemented sequentially to ensure lasting
stability, certainty, and predictability thereby achieving the desired impact on
financial, monetary, currency, and exchange rate stability.
146. The sequential approach will be anchored on five policy measures:
a) Adoption of a market-determined exchange rate system.
b) Efficient and optimal money supply management.
c) Introduction of a new structured currency.
d) Anchoring local currency on reserves backed by gold and foreign currency
balances.
e) Other support measures and obligations in response to market demands.

a) Adoption of Market Determined Exchange Rate System

147. The auction system has been replaced by a refined interbank foreign exchange
market under a willing-buyer-willing-seller (WBWS) trading arrangement.
Following this development, a transparent price discovery mechanism is now in
place in the interbank market. The Bank will continue to provide trading liquidity
to the market using the 25% surrender proceeds from exports.
b) Efficient and Optimal Money Supply Management

148. The Bank’s money supply management policy thrust will ensure that reserve
money growth is contained within the limits of growth in gold and foreign
currency reserves. The Bank will continue to maintain a tight monetary policy
stance to ensure sustainability of the monetary anchor. Efficient management of
liquidity and money supply will entail the discontinuation of all Quasi-Fiscal
Activities, and alignment of interest rates with positive real rates and exchange
rate expectations. The Bank will strictly adhere to Statutory limits on Bank
Lending to the Government.
c) Introduction of New Structured Currency
149. The Reserve Bank is introducing a structured currency which is generally defined
as a currency that is pegged to a specific exchange rate or currency basket and
backed by a bundle of foreign exchange assets (potentially including gold). This
means that a Central Bank can only issue domestic notes and coins when fully
backed by a foreign “reserve” currency or foreign exchange assets and that the
currency is fully convertible into the reserve currency on demand.
150. The structured currency being introduced is anchored by a composite basket of
foreign currency and precious metals (mainly gold) held as reserves for this
purpose by the Reserve Bank.
151. The strong macroeconomic fundamentals currently prevailing in the economy, as
reflected by persistent surpluses in the balance of payments, fiscal sustainability,
and a bullish mining sector will support the local currency.

(i) Currency Conversion and Swap
152. The two most important factors necessary in enhancing the optimal currency mix
in a multi-currency economy are transactional convenience and exchange rate
stability to guarantee the store of value function in local currency and related
savings instruments.

153. With effect from 5 April 2024, banks shall convert the current Zimbabwe dollar
balances into the new currency which shall be called Zimbabwe Gold (ZiG) to
foster simplicity, certainty, and predictability in monetary and financial affairs.
The new currency will co-circulate with other foreign currencies in the economy.
154. The swap rate will be guided by the closing interbank exchange rate and the price
of gold as at 5 April 2024. The swap rate shall be used to make legitimate
conversions of all ZW$ deposits in the banking sector; all ZW$ loans and advances
made by the sector; ZW$ treasury bills; all outstanding auction allotments; all
export surrender obligations; all prices of goods and services in ZW$; and any
other ZW$ denominated obligations.
155. On conversion of all current ZW$ balances, banks are directed to rename all the
current ZW$ accounts as ZiG accounts. Gold-backed Digital Token (GBDT)
accounts will no longer be called ZiG accounts but will be known as GBDT
accounts.
156. All ZW$ notes and coins held by account holders will be credited into their ZiG
accounts using the applicable conversion factor. The banks will continue to accept
these deposits for a period of 21 days after 5 April 2024.
157. The Reserve Bank has made special arrangements for those without bank accounts
to swap their ZW$ notes and coins at POSB and AFC Commercial Bank within
21 days after 5 April 2024.
158. In instances where the cash holding to be exchanged is above ZW$100,000, banks
shall apply the requisite know your customer (KYC) and Customer Due Diligence
(CDD) principles.

(ii)
Issuance of New Bank Notes and Coins
159. The introduction of the new structured currency will naturally require the issuance
of new bank notes to facilitate transactions in the economy, whilst maintaining the
Bank’s policy of a cash-lite economy. These notes shall be issued gradually in the
market to cater for small transactions and to ensure the availability of change, thus,

mitigating the use of retail vouchers in the local economy. As such, the proposed
denominations will bring convenience to the transacting public.
160. Accordingly, ZiG notes and coins shall be issued in denominations made up of
1ZiG, 2ZiG, 5ZiG, 10ZiG, 20Zig, 50ZiG, 100ZiG, and 200ZiG which will be
distributed through the usual normal banking channels and, will be fully covered
by the quantity and value of gold and foreign currency held as reserves. The
currency denominations are also informed by the intervening exchange rate of the
ZiG to the US$.

(iii)
Anchor of the Currency
161. ZiG shall at all times be anchored and fully backed by a composite basket of
reserves comprising foreign currency and precious metals (mainly gold), received
by the Reserve Bank as part of in-kind royalties and kept in the vaults of the Bank.
Foreign currency balances will be accumulated through market purchases from the
25% surrender requirements as well as sale of some precious metals received as
royalties.
162. As of 5 April 2024, the Bank has reserve assets of USD 100 million in cash and
2,522 kgs of gold (US$185 million) to back the entire local currency component
of reserve money which currently stands at ZW$2.6 trillion requiring full
(100%) cover of gold and cash reserves amounting to US$90 million. The gold
and cash reserve holdings currently with the Bank represent more than 3 times
cover for the local currency being issued.

(iv)
Exchange Rate Management System
163. The starting exchange rate shall be determined by the prevailing closing interbank
exchange rate as at 5 April and the London PM Fix price of gold as at 4 April
2024.
164. The intervening exchange rate shall be determined by the inflation differential
between ZiG and USD inflation rates and the movement in the price of the basket

of precious minerals held as reserves. The weights will be determined by the
composition of reserve assets.
165. To ensure the sustainability of the exchange rate system, the following measures
will be strictly implemented:
• Strict adherence to the Statutory limit on Bank lending to the Government.
• Ensuring that the quantum of reserve money is fully backed by the equivalent
gold and foreign currency reserves.
• Maintaining a tight monetary policy stance to ensure the sustainability of the
monetary anchor.
• Ensuring that up to 50 percent of the liquidated surrender forex receipts, are
channelled to support the forex market, while retaining the balance to meet
Government foreign currency needs.
• Implementation of strict liquidity management to smoothen liquidity shocks
that cause spikes in the exchange rate; and
• Continued fostering of super demand for the local currency by Government
through a mandatory requirement for companies to settle at east 50% of their
tax obligations on Quarterly Payments Dates (QPDs) in ZiG.


(v)
Foreign Exchange Liquidity Management

166. Notwithstanding the new currency arrangement, effective management of
liquidity in the market remains key in stabilizing the exchange rate and inflation.
167. The Bank will use 50% of the foreign currency proceeds from surrender
requirements for strategic interventions in the foreign exchange interbank market.
The remaining foreign currency will be available to satisfy the Government's
foreign currency obligations in exchange for ZiG and to build foreign exchange
reserves for the Reserve Bank. Foreign currency retention thresholds remain
standardised at 75% across all sectors, except for small-scale gold producers.

(vi)
Interest Rate Policy
168. The Bank has recalibrated the Bank policy rate from 130% per annum to 20% per
annum consistent with the new monetary policy framework.

169. The overnight accommodation interest rate has been set at 5% above the Bank
policy rate and the Bank deposit facility interest rate at 7.5% below the Bank
policy rate, thus giving the starting interest rate corridor of between 11% to 25%
per annum.
170. The Bank policy rate and the corresponding interest rate corridor will be reviewed
by the Monetary Policy Committee (MPC) from time to time in line with inflation
developments.
171. Savings and time deposits interest rates on ZiG are set at 9% and 7.5% below the
Bank deposit facility rate of 12.5% respectively, while interest rates on FCA
deposits remain unchanged at 1% and 2.5% for savings and time deposits,
respectively.
(vii) Open Market Operations (OMO)
172. Going forward, open market operations will be carried out to ensure that reserve
money will always be fully backed by a corresponding composite basket of reserve
assets comprising precious minerals (predominantly gold) and foreign currency
balances.
173. All the current non-interest-bearing non-negotiable certificates of deposits
(NNCDs) in ZiG beyond the optimal liquidity level and those encumbered by
existing foreign currency structures will be converted into tenors of 1 year and
above.
(viii) Statutory Reserve Requirements
174. The statutory reserve requirements for demand deposits in ZiG and savings and
time deposits in ZiG remain at 15% and 5%, respectively. In order to foster
continued financial sector stability in the face of increased lending in foreign
currency, measures will be put in place to enhance foreign exchange liquidity,
moderate foreign currency exposures and mitigate against payment gridlocks in
the banking sector.
175. In this regard, the Bank is increasing the statutory reserve ratio for foreign
currency demand deposits from 15% to 20% effective 8 April 2024. The statutory

reserve requirements for foreign currency time and savings deposits shall,
however, remain at the current level of 5%.
(ix)
Treasury Bills Denominated in ZW$
176. All treasury bills previously issued in ZW$ will be converted to ZiG and the rate
adjusted accordingly.

(x)
Alleviating Bank Charges
177. Cognisant of calls by the banking public for affordable and reasonable bank
charges, the Bank is with immediate effect directing all banking institutions to put
exemption clauses on monthly maintenance or service charges for both FCA and
ZiG deposit accounts that maintain a consecutive minimum daily balance of
US$100 and below or its equivalent in ZiG for a period of up to 30 days. This will
avoid incidences of low-cost accounts being charged maintenance fees to the point
where accounts reach negative balances and, in the process, prejudice depositors
and discourage potential savings.

178. The Bank shall continue to monitor the pricing of banking products and services,
as well as enforce the pricing framework agreed upon with the Bankers
Association of Zimbabwe (BAZ). It is envisaged that as banking institutions
embark on accelerated digital transformation, the institutions will achieve
operational efficiencies which will impact positively on the cost of some banking
services.
d)
Other Supporting Measures and Bank Obligations

179. The following measures will be strictly implemented to support the new monetary
policy framework:
(i)
Promoting Increased Demand for Local Currency
180. Statutory Instrument 218 of 2023 restored the use of multicurrency in the
settlement of any transactions until 31 December 2030. Accordingly, the Bank will

prepare a structured roadmap to gradually promote the increased use of the new
local currency as we move towards 2030.
181. In order to foster demand for the local currency, Government will make it
mandatory for companies to settle at least 50% of their tax obligations on Quarterly
Payments Dates (QPDs) in ZiG. The Bank will continue with its strict liquidity
management in order to mitigate against shocks that cause spikes in the exchange
rate.
182. Overall, the increased role of the local currency will support and sustain the current
macroeconomic stability and economic resilience despite the recurrence of global
and domestic shocks. The Bank working in collaboration with Government will
continue to provide forward guidance to the market in promoting the wide use of
ZiG.

(ii)
Auction Allotments Obligations
183. Following the establishment of a refined interbank foreign exchange market, all
outstanding auction allotments will be converted into ZiG and refunded to
recipients at the current interbank exchange rate. This will allow the new system
to start on a clean slate using the interbank foreign exchange system. The refund
will entail conversion of all outstanding auction allotments into a two (2) year ZiG
denominated instrument at an interest rate of 7.5% per annum.
184. This process will allow the beneficiaries to maintain the value of their proceeds
under the new framework.
(iii)
Outstanding Payments for Auction Surrender Obligations
185. All outstanding payments for foreign exchange purchased by Treasury under the
25% surrender requirement will be converted to a ZiG denominated instrument
with a tenor of one (1) year at an interest rate of 7.5% per annum.

(iv)
Gold Coins and Gold Backed Digital Tokens (GBDTs)

186. The gold coins and GBDTs shall continue to be used as investment instruments
and to manage liquidity in the economy to ensure a stable exchange rate. In this
regard, the issuance of both higher and smaller denominations of gold coins will
continue as an open-market-operation investment instrument for value
preservation.
187. As already indicated above, the Gold-backed Digital Tokens (GBDT) will no
longer be called ZiG but named GBDT.


(v)
Reconfiguration of National Payment Systems
188. In preparation of the structured currency, it is important that stakeholders involved
in the payment systems sector are ready to onboard the new ZiG currency. The
same will be expected in the rest of the economy as transactions will henceforth
be undertaken in ZiG. Banks have already configured their systems to
accommodate ZiG to undertake transactions in the economy.
189. By April 8, 2024, Mobile Network Operators (MNOs), who are essential to the
National Financial Inclusion Strategy, will also be expected to ensure that all of
their customers can effortlessly transition from ZW$ wallets to ZiG wallets.
(vi)
Domestic Pricing of Goods and Services
190. Once the local currency is redenominated in Zimbabwe Gold (ZiG), all domestic
traders are expected to consistently modify their pricing strategy to account for the
currency reforms from the Bank.
191. Within seven days from 5 April 2024, all entities other than banks and MNOs are
expected to have completed the configuration of their systems to conduct business
in ZiG.

e)
Financial Stability Measures

192. The stability of financial institutions is critical given the increased lending in
foreign currency in the economy to avoid yesteryear bank non-performing loans
challenges. In this regard, the Bank reiterates and emphasises the following:
(i)
Compliance With Minimum Capital Requirements
193. The Bank has maintained the minimum capital requirements for all categories of
banking institutions and microfinance institutions as follows:
Table 14: Minimum Capital Requirements
Type of institution
Minimum Capital
Requirements in ZiG
Equivalent to:
TIER 1 - Large Indigenous Commercial Banks &
all Foreign Banks
US$30 million
TIER II - Commercial Banks, Merchant Banks,
Building Societies, Development Banks, Finance &
Discount Houses
US$20 million
TIER III - Deposit-Taking Microfinance Banks
US$5 million
Credit Only Microfinance Institutions
US$25,000


194. No banking institution or microfinance institution whose core capital is noncompliant with the prescribed minimum capital requirements shall pay dividends
to its shareholders unless it has taken adequate steps to comply with prudential
requirements, including capital adequacy, and has been approved by the Bank.
(ii)
Foreign Currency Exposure Limits
195. The single currency and the overall foreign exchange risk exposure limits are
critical macro-prudential tools for managing foreign exchange risk. In this regard,
the limits shall be maintained at 10% and 20% of the net capital base, respectively.
196. As prescribed in the Third Schedule to the Banking Regulations S. I. 205 of 2000,
reviews would be done on a case-by-case basis, depending on a banking
institution’s specific requirements.
(iii)
Climate Risk Management

197. Climate Risk Management and sustainability issues have become critical for
value-driven financial institutions. In line with the requirements of Guideline
No.01-2023/BSD: Climate Risk Management, financial institutions are required
to submit by 30 April 2024, the board-approved Climate Risk Management
Strategies incorporating risk appetite, risk management frameworks including the
approach to the identification, measurement, and monitoring of climate-related
risks; as well as internal control and reporting arrangements.

(iv)
Sustainable Banking Practices
198. The adoption of sustainability principles is increasingly becoming a key pillar to
the sustainable growth of economies. Against this background, the Bank continues
to work constructively with banking institutions to ensure that the transition to a
more sustainable, environmentally, and socially responsible financial sector
becomes a reality.
199. Under the above and with effect from the quarter ending 31 March 2024, Boards
of banking institutions are required to ensure that sustainability considerations are
integrated into the institution’s overall business strategy and are part of the agenda
for board meetings. In addition, the board should integrate sustainability into the
board governance system.
200. Furthermore, to foster sustainability literacy, banking institutions’ boards are also
encouraged to conduct workshops on sustainability issues, such as climate change
trends, climate risk and sustainable finance, among others.

e).
Financial Inclusion Measures
201. The Bank continues to support financial inclusion to support sustained inclusive
growth in the economy. Under this noble cause, the Bank will put the following
measures:

(i)
Digital Financial Literacy
202. Financial literacy is key to the increased usage of financial services by
marginalised communities, and to increasing the depth and breadth of financial

services outreach. With effect from 30 June 2024, all banking and microfinance
institutions are required to put in place programs that facilitate digital financial
literacy of their target market to facilitate increased usage of financial services in
line with the strategic vision of the National Financial Inclusion Strategy II.

(ii)
Facilitating Access to Banking Services for People with Disabilities
203. Persons with disabilities have long faced limited access to financial services. To
address this irregularity and align with regional and international trends, banking
institutions and microfinance institutions are required to facilitate access to and
usage of financial services by persons with disabilities through appropriate
infrastructure, both physical and information communication technology.

204. Banking institutions and microfinance institutions will be required to submit a plan
by 30 June 2024 outlining the measures to be taken to facilitate the financial
inclusion of persons with disabilities.

(iii)
Consumer Protection Framework
205. All banking and microfinance institutions are required to establish, implement and
maintain effective and transparent procedures for the reasonable and prompt
handling of customer complaints. The procedures should facilitate complaints
resolution promptly in line with principles of the Consumer Protection Framework
No. 01-2017/BSD.
206. As part of the ongoing implementation and monitoring of the consumer protection
framework, all banking and microfinance institutions are required to generate a
quarterly report, to be prescribed by the Bank, for submission with effect from 31
March 2024.

SECTION SIX

INFLATION OUTLOOK

207. The introduction of a structured currency should result in the dissipation of
inflationary pressures in the short to medium term. As such, monthly inflation rates
are expected to be well below 1% as the currency will be anchored on stable
foreign currency and commodities. Importantly, the inflation profile is expected
to mirror the current trend of the domestic USD inflation which averaged 5.03%
in 2023.

208. In the near term, reflecting the current inflationary pressures, inflation is expected
to be elevated in the first quarter and dissipate in the medium term in line with
stability in ZiG. As such, despite an expected bump in inflation in the near term,
annual inflation is expected to close the year below 5%. Figure 31 shows the
anticipated inflation profile of a central and upper forecast.

Figure 31: Domestic USD Inflation Trend 2023 and Outlook in ZiG for 2024


Jun-23
Jul-23
Aug-23
Sep-23
Oct-23
Nov-23
Dec-23
Jan-24
Feb-24
Mar-24
Apr-24
May-24
Jun-24
Jul-24
Aug-24
Sep-24
Oct-24
Nov-24
Dec-24
YoY baseline
YoY
Yoy Policy

209. Exogenous shocks emanating from increased geo-political fragmentation and
skirmishes along major global shipping lanes may result in increased prices of oil
and other imported commodities. These developments may also result in a
resurgence of inflationary pressures in the global economy with a significant passthrough to the domestic economy.

SECTION SEVEN

CONCLUSION

210. The new structured currency is anticipated to restore confidence in the local
currency and hence safeguard the dual currency system which, to date, has served
the country very well. This will go a long way in fostering simplicity, credibility,
certainty, and predictability in monetary and financial affairs.

211. The Reserve Bank also remains committed to pursuing a tight monetary policy to
guarantee price and exchange rate stability which are the key ingredients necessary
to sustain the desired optimal currency mix in the economy. The Reserve Bank’s
commitment to strict adherence to the full principles of ZiG, including full backing
of reserve money will sustain the currency stability.

212. Overall, the increased role of the local currency will support and sustain the current
macroeconomic stability and economic resilience despite the recurrence of global
and domestic shocks. The Reserve Bank working in collaboration with
Government will continue to promote increased use of the local currency by 2030.

213. I, therefore, call upon all stakeholders to continue observing good business ethics
and pricing models to complement the Reserve Bank’s efforts to sustain price and
financial system stability which is critical for sustained and inclusive economic
growth and development.


THANK YOU AND GOD BLESS ZIMBABWE


DR. JOHN MUSHAYAVANHU
GOVERNOR
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80 Samora Machel Avenue
Box 1283, Harare, Zimbabwe
Email:
Reserve Bank of Zimbabwe
93 Leopold Takawira Street
Box 399 Bulawayo, Zimbabwe
Tel: +263 (0292) - 72141-5, +263 8677002046
Email:
www.rbz.co.zw
@ReserveBankZim
@ReserveBankZim
Tel: +263 242 703000 /+263 867 700 0477
Reserve Bank of Zimbabwe