Issued
IN TERMS OF THE RESERVE BANK OF ZIMBABWE ACT
CHAPTER 22:15, SECTION 46
By
DR. G. GONO
GOVERNOR
RESERVE BANK OF ZIMBABWE
28 JULY 2010
MONETARY
POLICY STATEMENT
Mid- Year
2010 Mid - Year Monetary Policy Statement
2010 Mid - Year Monetary Policy Statement

INTRODUCTION AND BACKGROUND

BANKING SECTOR DEVELOPMENTS

ARCHITECTURE OF THE BANKING SECTOR

CAPITALISATION LEVELS OF BANKING INSTITUTIONS

FINANCIAL INTERMEDIATION

SECTORAL DISTRIBUTION OF CREDIT

BANK CHARGES AND DEPOSIT RATES

POLICY MEASURES

INTEREST RATES

INTEREST RATES MIS-MATCHES

INFLATION-INDEXED REAL INTEREST RATES RANGES

DEPOSIT RATES

MANDATORY PUBLICATION OF CONDITIONS OF SERVICE

BASEL II IMPLEMENTATION

ENHANCEMENT OF RISK MANAGEMENT

REAL SECTOR OVERVIEW: GLOBAL AND LOCAL DEVELOPMENTS

GLOBAL ECONOMIC DEVELOPMENTS

ZIMBABWE: REAL SECTOR OVERVIEW

AGRICULTURE

MINING

GOLD

COAL

PLATINUM

NICKEL

MANUFACTURING

INFLATION DEVELOPMENTS

MONETARY DEVELOPMENTS

STOCK MARKET DEVELOPMENTS

EXTERNAL SECTOR DEVELOPMENTS

EXTERNAL DEBT

EXTERNAL DEBT AND PAYMENT ARREARS (US$ MILLION)

INTERNATIONAL COMMODITY PRICE DEVELOPMENTS

SHORT-TERM TRADE FINANCE FACILITIES

UTILISATION OF SHORT-TERM TRADE FINANCE FACILITIES

EXCHANGE CONTROL OVERVIEW

EXPORT PERFORMANCE FOR THE FIRST HALF OF 2010

IMPORT PERFORMANCE FOR THE FIRST HALF OF 2010

EXCHANGE CONTROL POLICY MEASURES

EXTERNALISATION

MEASURES TO COMBAT EXTERNALISATION OF FOREIGN CURRENCY

ACCOUNTING FOR EXPORT RECEIPTS FROM CROSS-BORDER TRANSPORT OPERATIONS

MEASURES TO FACILITATE FOREIGN INVESTMENT

Contents
Table of
2010 Mid - Year Monetary Policy Statement
2010 Mid - Year Monetary Policy Statement

PROMULGATION OF EXCHANGE CONTROL REGULATIONS

NATIONAL PAYMENTS SYSTEM

REAL TIME GROSS SETTLEMENT (RTGS) SYSTEM

INTER-BANK CHEQUE SYSTEM

POLICY GUIDANCE ON PAYMENT SYSTEM INITIATIVES

CENTRAL BANK’S ROLE OF PAYMENT SYSTEMS OVERSIGHT

REGIONAL PAYMENT SYSTEMS INITIATIVE

CONCLUSION

Contents
Table of
2010 Mid - Year Monetary Policy Statement
2010 Mid - Year Monetary Policy Statement

INTRODUCTION AND BACKGROUND
1. This Monetary Policy Statement is issued in terms of Section 46 of the Reserve Bank of Zimbabwe Act [Chapter 22:15] to
lay out the focal policy areas that will guide the Bank’s Monetary Policy implementation programmes over the next 6
months.
2. In drawing this policy framework, the Bank is also guided by Government’s overall short-term, medium and long term
economic and social programmes. The Mid Term Fiscal Policy Review, announced by the Minister of Finance on 14th
July 2010, therefore, forms the key anchor points around which this Monetary Policy Statement is formulated to ensure
greater policy congruency and effectiveness between the Fiscal and Monetary sides.
3. This Monetary Policy Statement has also been crafted consistent with the changed regulatory environment as reflected in
the Reserve Bank of Zimbabwe Amendment Act of 31 March 2010 which has refocused the operations of the Central
Bank.
4. I wish to commend Government for the recent appointment of the Reserve Bank of Zimbabwe Board of Directors during
the first week of May, 2010, which appointments now make it feasible for the Central Bank to address outstanding
structural and viability matters among other strategic areas.
ECONOMIC RECOVERY PROSPECTS BRIGHT...
5. As the country works through the second half of 2010, prospects of economic recovery are bright and this can be fortified
through coordinated efforts to anchor the gains of macroeconomic stability achieved so far.
6. Albeit showing worrying signs of resurgence, Zimbabwe’s inflation has now trended in low regions of under 7%, that allow
for the convergence of the economy’s macroeconomic performance indicators towards sustainable steady-state growth
levels.
7. To anchor inflation permanently at low and stable levels, both supply-side and demand management, as well as
psychological interventions are critical.
8. This Monetary Policy Statement will present the ingredients for the achievement and maintenance of low and stable
inflation.
9. Zimbabwe being an agro-based economy, overall positive real economic growth will also be sustained through concrete
measures that restore vibrancy in agricultural production.
10. As will be demonstrated in this Monetary Policy Statement, another critical success factor that will promote greater
stability is the need to cultivate positive expectations and deepen business confidence in the economy.
11. Through this stability, short, medium term and long-term capital inflows will be ensured.
12. This way, corporates and individuals who are currently banking their money out of the country would also be encouraged
to bring their their resources onshore to liquefy domestic money and capital markets.
13. Notable growth in the mining sector will need to be harnessed into being a key pillar in the economy’s overall welfare
through win-win fiscal regimes that optimizes Government revenues while at the same remaining friendly to investors.
2010 Mid - Year Monetary Policy Statement
2010 Mid - Year Monetary Policy Statement

14. Manufacturing, Tourism, Transport and other service sectors need also to adopt new ways of doing business in the face
of reduced trading margins, rising competition(shrinking local, regional and international markets).
15. Specifically, the winning models of low production costs, low margins and high trading volumes have to be adopted as a
matter of survival.
16. In all these rebalancing equations, it is imperative that internal consistency be maintained between factor-input prices
and the general inflation levels.
17. To this end, an intricate balance has to be struck between overall wage increases and inflation levels in the economy.
18. Where wage increases outpace productivity and inflation levels, sooner rather than later, the productive sectors will fail to
pay their way leading to the protracted undesirable spiral of cost push inflation which would in turn be aggravated by the
resultant shortages induced price bubbles.
19. Success in any economic turnaround also hinges significantly on the depth and stability of the financial sector.
20. It is for this reason that this current Monetary Policy Statement devotes considerable space and focus on the banking
sector stability.
21. As will be expanded later in the statement, the notable cases of highly extractive lending interest rates on the one hand
co-existing with prevalent cases of near zero deposit interest rates cannot be tolerated any longer as this undermines the
whole essence of financial intermediation in the economic growth and development equation.
22. This Monetary Policy Statement also deals with another disturbing trend of excessive bank charges that are fast
becoming a debilitating cancer in the country’s banking sector.

2010 Mid - Year Monetary Policy Statement
2010 Mid - Year Monetary Policy Statement

BANKING SECTOR DEVELOPMENTS
INTRODUCTION
23. The banking sector’s intermediary role has improved, notwithstanding the general liquidity shortages in the economy and
absence of lender of last resort function.
24. The banking sector has generally remained safe and sound, and the Reserve Bank has continued to implement
supervisory strategies anchored on international best practices.
ARCHITECTURE OF THE BANKING SECTOR
25. As at 30 June 2010, the country’s banking sector remained well diversified, comprising 26 banking institutions; 16
licensed Asset Management Companies; and 95 operating microfinance institutions under the supervision of the
Reserve Bank.
Structure of the Banking Sector
Type of Institution
Number
Commercial Banks

Merchant Banks

Finance Houses*

Discount Houses*

Building Societies

Savings Bank

Microfinance Banks

Total

Asset Management Companies

Microfinance institutions

CAPITALISATION LEVELS OF BANKING INSTITUTIONS
26. As at 30 June 2010, seventeen (17) out of 24 banking institutions (excluding POSB and the microfinance bank) were in
compliance with the prescribed minimum paid-up capital requirements.
27. The 7 of unqualifying institutions have been directed to either raise fresh capital from existing shareholders or bringing in
new partners without any further delays. There will be no further extension beyond 31 December 2010.
28. The Reserve Bank is on record advising the banking sector that Monetary Authorities no longer have appetite for
curatorships.
LEVEL OF CAPITALISATION OF ASSET MANAGEMENT COMPANIES (AMCs)
29. As at 31 June 2010, fifteen (15) out of the 16 (sixteen) asset management companies had met the minimum paid-up equity
capital of $500,000 effective 31 March 2010.
2010 Mid - Year Monetary Policy Statement
2010 Mid - Year Monetary Policy Statement

Capital Positions for AMCs as at 30 June 2010
Institution
Verified Core Capital Agreed With
Required Minimum Capital
The Bank As At 30 June 2010
As At 31 March 2010
KINGDOM
3,020,188.00
500,000.00
CBZ ASSET
900,859.07
500,000.00
ABC
851,585.34
500,000.00
OLD MUTUAL
702,501.00
500,000.00
TFS
648,615.81
500,000.00
PREMIER
640,443.00
500,000.00
EQUIVEST
635,926.70
500,000.00
ZB
608,606.00
500,000.00
PURPOSE
562,010.00
500,000.00
TN
515,213.80
500,000.00
IMARA
513,245.79
500,000.00
MBCA
510,736.44
500,000.00
INFINITY
501,680.71
500,000.00
ZIMNAT
500,000.00
500,000.00
FIDELITY
523,850.00
500,000.00
ALPHA
483,687.00

500,000.00
30. Undercapitalised banking institutions and AMCs with realistic recapitalisation initiatives were given time to pursue their
initiatives. Those with unrealistic initiatives were directed to merge their operations with stronger banking institutions,
surrender their licences voluntarily or face involuntary liquidation.
31. The last quarter has, therefore, witnessed the disposal of business units and rationalisation of operations by some banks
as they endeavour to realign their capital positions and business and activities.
32. The Registrar of Banking Institutions cancelled the banking licences of the Discount Company of Zimbabwe (DCZ) and
NDH Bank Limited, following, the institutions’ separate requests for cancellation of their licences in terms of section 14 (4)
of the Banking Act [Chapter 24:20].
33. NDH Bank applied for the voluntary cancellation of its licence citing viability challenges and shareholders’ inability to raise
minimum capital required for merchant banks of US$10 million.
34. The surrender of the DCZ banking licence follows the Kingdom group’s consolidation of banking operations which will see
the discount house business being merged with the microfinance business.
35. The Reserve Bank will continuously monitor banking institutions’ capitalisation and institute appropriate supervisory
measures to ensure a safe and sound banking sector.
2010 Mid - Year Monetary Policy Statement
2010 Mid - Year Monetary Policy Statement

FINANCIAL INTERMEDIATION
36. As at 18 June 2010, total banking sector deposits amounted to $1.80 billion, with Loans and Advances of $1.11 billion.
Trend of Banking Sector Deposits, Loans & Advances
Total Deposits
Total Loans and Advances Loans/Deposits Ratio
31.12.09
$1,363.67m
$674.75m
49.48%
08.01.10
$1,404.49m
$690.20m
49.14%
15.01.10
$1,412.15m
$708.50m
50.17%
22.01.10
$1,410.24m
$715.57m
50.74%
29.01.10
$1,405.95m
$743.37m
52.87%
05.02.10
$1.463.88m
$759.41m
51.88%
12.2.10
$1.489.22m
$774.34m
52.00%
19.2.10
$1,487.03m
$795.12m
53.47%
26.2.10
$1,570.32m
$824.39m
52.50%
5.3.10
$1,610.90m
$853.87m
53.01%
12.3.10
$1,664.78m
$862.44m
51.81%
19.3.10
$1,665.57m
$888.84m
53.37%
26.3.10
$1,680.55m
$899.12m
53.50%
01.04.10
$1,671.85m
$946.46m
56.61%
09.04.10
$1,708.53m
$924.83m
54.13%
16.04.10
$1,673.28m
$948.05m
56.66%
23.04.10
$1,718.55m
$963.46m
56.09%
30.04.10
$1,708.23m
$934.43m
54.70%
07.05.10
$1,754.44m
$953.70m
54.36%
14.05.10
$1,761.90m
$977.94m
55.00%
21.05.10
$1,812.85m
$1,013.42m
55.90%
28.05.10
$1,810.92m
$1,043.41m
57.62%
04.06.10
$1,811.68m
$1,093.10m
60.34%
11.06.10
$1,869.77m
$1,086.29m
58.10%
18.06.10
$1,798.67m
$1,108.24m
61.61%

SECTORAL DISTRIBUTION OF CREDIT
38. In November 2009, the Reserve Bank urged banking institutions to re-orient their lending portfolios to achieve the
following sectoral thresholds for lending activities:
Economic Sector
Recommended Threshold
Agriculture
30%
Manufacturing
25%
Mining
25%
Other
20%

2010 Mid - Year Monetary Policy Statement
2010 Mid - Year Monetary Policy Statement

Sectoral Distribution of Loans as 18 June 2010
Sector
Loans & Advances
Proportion of Total Loans & Advances
Agriculture

229,260,644.91
20.69%
Distribution

227,601,385.41
20.54%
Manufacturing

220,247,650.88
19.87%
Services
200,988,081.39
18.14%
Mining

83,092,596.76
7.50%
Individuals

58,625,970.39
5.29%
Financial Firms

32,235,927.15
2.91%
Transport

23,333,988.67
2.11%
Construction

18,395,067.97
1.66%
Communication

14,456,445.63
1.30%
Total

1,108,237,759.16
100.00%
BANK CHARGES AND DEPOSIT RATES
40. The Reserve Bank promotes market determination of applicable charges and interest rates for bank products and
services. The Bank is, however, cognisant of the need to balance viability of the banking sector and accessibility to
affordable banking services.
41. The Central Bank has and continues to receive multiple genuine representations from the banking public on the excessive
bank charges that are being levied by some banks.
42. Under the current conditions of reduced general market liquidity, Shareholders, Boards of Directors and Management
teams in banking institutions must have a frank re-look at their pay structures and other overheads.
43. The current scenario where bank management in some institutions get paid and live like angels whilst their own financials
are suggesting otherwise cannot be sustained.
44. The banking corporate and individual sectors cannot therefore, be made to sustain utopia-style packages that do not
reflect the Bank’s core income streams benchmarked on reasonable charges and normal trading activities.
45. As Monetary Authorities, we do not wish to be dragged to the extreme points where there will be no option but to prescribe
limits on bank charges.
46. Indeed, such a day will regrettably be a dark one as our economy remains steadfast in allowing the virtues of market
forces to flourish in the interests of both allocative and productive efficiencies.
2010 Mid - Year Monetary Policy Statement
2010 Mid - Year Monetary Policy Statement

POLICY MEASURES
STATUTORY RESERVES
47. As part of risk containment measures in the banking system, statutory reserve requirements will be abolished with
immediate effect.
48. This policy initiative will release more resources for lending by the banking sector and will substantially dampen interest
rates, which are currently prohibitive and counterproductive.
LIQUID ASSET RATIO
49. To minimize systemic risks in the banking sector, the prescribed prudential liquid asset ratio requirement of 10% in our
Banking Regulations will be increased to a minimum of 20% with immediate effect.
50. Banks are hereby called to comply without exceptions.
RESUSCITATION OF THE LENDER OF LAST RESORT FUNCTION
51. As spelt out in the 2010 Mid-Term Fiscal Review, the Central Bank has been capacitated with a modest seed fund to
resume its lender of last resort function.
52. In due course, the detailed operational modalities for this critical intervention will be circulated to the Banking Sector.
INTEREST RATES
53. Interest rates which essentially denote the cost of money to the receiving entity (the debtor entity) or a return to the saving
or lending entity (the creditor) entity, play an important signalling role in the economy’s financial and real sectors.
54. This signalling function requires that:
(a) Saving individuals, households and corporate entities get a fair return on their savings; and
(b) The borrowing entities be charged fair interest rates that reflect the time-value of money (inflation and opportunity costs),
as well as the risk profiles in the borrowing sectors.
55. Tragically, however, in Zimbabwe, some of the players in the banking sector have completely diverted their interest rate
regimes from the core fundamentals of inflation and fair evaluation of risk profiles in the market, more towards
unexplained, outrageous, punitive lending rates.
56. Reflecting this are the excessive positive real lending rates (above inflation margins) and negative real rates to depositors
as exemplified below:
2010 Mid - Year Monetary Policy Statement
2010 Mid - Year Monetary Policy Statement

INTEREST RATES MIS-MATCHES
Inflation(Year on Year June, 2010)
Range of Upper Lending Rates(% per annum) Lower Deposit rates(% per annum) Real Rates
Lending Deposits
5.3%
30-50%
0 – 1%

Positive Negative
24.7- 5.3-
44.7% 4.3%
57. The implications of the above skewed interest rates profiles are that:
(a) Lenders are being heavily penalised. The positive real borrowing rates of 24.7 – 44.7% reflect the financial burden that the
banking sector is unfairly imposing on the productive, individual and household sectors of the economy. This is
retrogressive to the turnaround efforts; and
(b) Depositors are losing their value of money due to the negative real deposit rates. This has the hazardous effect of
discouraging savings. A nation with limited or no savings culture has no scope for sustainable long-term investment
finance, particularly from internal sources.
58. Against this unfortunate inability by some players in the banking sector to shake away from the hangover of the negative
psychological effects of the 2007-2008 hyperinflationary periods, the Reserve Bank has been left with no other option but
to intervene with the immediate introduction of a more robust market-based interest rates framework.
2010 Mid - Year Monetary Policy Statement
2010 Mid - Year Monetary Policy Statement

DEPOSIT RATES
61. The Reserve Bank fully appreciates the “hot” nature of most deposits which can be withdrawn at very short notice.
62. This notwithstanding, it is imperative that banks play their deposit mobilisation function through the awarding of positive
real deposit rates that are consistent with the above market-linked lending rates system.
MANDATORY PUBLICATION OF CONDITIONS OF SERVICE
63. In order to promote transparency and a levelled playing field to the providers and users of banking services, with
immediate effect, each banking institution must post onvisible boards, their explicit conditions of service, covering deposit
and lending rates, as well as all other banking charges.
64. The mandatory publishing of each bank’s conditions of service will ensure that banks do not penalize borrowers through
extractive charges and interest rates that are unrelated to fundamentals.
65. The Banking Public are encouraged and advised to actively verify their actual banking terms with the published conditions
of service, reporting to the Central Bank any instances of misrepresentations.
66. Appropriate remedial measures will be taken against those banks which misrepresent facts in respect of their true
conditions of business.
67. Whilst the Reserve Bank does not subscribe to the intervention of prescribing bank charges, the Banking Sector must
strongly take heed that any excesses on bank charges will not be left unchecked.
BASEL II IMPLEMENTATION
68. The Reserve Bank issued a draft guideline Guideline No. 1-2010/BSD: Technical Guidance on Basel II
Implementation In Zimbabwe on 28 April 2010 for comments by the banking sector.
69. Comments from the banking sector are being incorporated into the guideline which will be issued to the market on 1
August 2010, for implementation.
70. Through this initiative, financial sector stability will be deepened further.
ENHANCEMENT OF RISK MANAGEMENT
71. In line with recent trends in risk management and the weaknesses unearthed by the global financial crisis, banking
institutions are expected to manage risk in a more comprehensive, coordinated and integrated way across the entire
business spectrum as opposed to focussing only on regulatory compliance.
2010 Mid - Year Monetary Policy Statement
2010 Mid - Year Monetary Policy Statement

73. As such, the Reserve Bank requires banking institutions to develop formal bank-wide risk management frameworks
incorporating the Enterprise-wide Risk Management (ERM) concept. In terms of this approach, banking institutions adopt
an integrated process for identification, measurement and managing of all risks within the institution.
74. The Reserve Bank issued a circular to banking institutions on 28 April 2010 requesting updated risk management
frameworks incorporating the Enterprise-wide Risk Management concept.
75. In this respect, the Reserve Bank is also in the process of revising the Risk Management Guideline to rake into account the
unfolding global dynamics of financial sector risk profiling and management.
REAL SECTOR OVERVIEW: GLOBAL AND LOCAL DEVELOPMENTS
GLOBAL ECONOMIC DEVELOPMENTS
76. Global Economic has improved during the fourth quarter of 2009 and the first half of 2010. The rebound in global
economic activity is due to resurgence in confidence in world financial markets and a myriad of policy stimuli implemented
by most of the advanced economies.
77. The global economy is thus projected to grow by 4.3% in 2010 compared to a contraction of 1.1% experienced in 2009.
Nascent recovery signs have been evidenced by accelerating world trade, industrial production, and rising consumer
demand.
78. The downside is likely to emanate from recent turbulence in financial markets as a result of the debt crisis in Greece which
has weighed down on growth prospect. The Greek debt crisis originated from the twin challenges of severe fiscal deficit
and high public debt, as well as a competitiveness problem. European stock markets took a tumble due to the effects of
the Greek debt crisis.
2010 Mid - Year Monetary Policy Statement
2010 Mid - Year Monetary Policy Statement

WORLD ECONOMIC GROWTH
Source: IMF Economic World Outlook
ADVANCED ECONOMIES
79. Advanced economies are projected to post strong growth of about 4.6% in 2010 compared to a contraction of 1.2%
experienced in 2009 owing to the global financial crisis. In the US, growth is projected to peak at 3.3% in 2010 following a
contraction of 2.4% in 2009 precipitated by the credit crunch, as well as falling housing and equity prices. Growth in 2010
will be driven by strong policies aimed at restoring stability at the core financial institutions, improved financial conditions
and a recovery in consumer demand.
80. Risks, however, still remain stemming from uncertainty about regulatory reforms and the possibility of renewed weakness
in the U.S. property market.
EURO ZONE
81. The Euro Zone is projected to register a modest growth of 1.0% in 2010 following a decline of 4.1% in 2009. Tight credit
conditions will limit private investment. Rising unemployment will also weigh on consumption. Although financial market
conditions in the region have improved, bank-based financial system will take time to fully resume its intermediating role.
ASIAN COUNTRIES
82. The GDP growth for Asia is projected to increase from 0.9% in 2009 to 6.7% in 2010. Asia’s strong recovery from the
global financial crisis will be sustained by continued buoyancy in exports and strong private domestic demand.
83. In Japan, growth is now projected to rise to about 2.5% in 2010, compared to a 5.2% contraction in 2009, attributed to
stronger-than-expected exports during the first half of 2010.
84. The Chinese economy is projected to grow by 10.5% in 2010 from 6.5% growth in 2009. Despite the subdued external
demand, economic growth will be sustained by aggressive efforts to provide major fiscal stimulus and monetary easing,
which are helping boost consumption and infrastructure investment. In addition, the export sector is a relatively smaller
share of the economy, particularly after factoring in its high import content.
2010 Mid - Year Monetary Policy Statement
2010 Mid - Year Monetary Policy Statement

85. In India, growth is expected to accelerate to about 9.5% in 2010 from 5.7% in 2009, as robust corporate profits and
favourable financing conditions fuel investment. The strong growth will be driven by improved financing conditions and
the stimulus aimed at suppressing the effects of the global financial crisis.
SUB-SAHARAN AFRICA
86. Growth in Sub-Saharan Africa is projected to rise from 2.2% in 2009 to about 5% in 2010 as a result of firming international
commodity prices and stronger economic policies that are helping many economies to drive up internal demand and
attract capital inflows. The ongoing rebound in global trade is also supporting the recovery in many emerging and
developing economies.
ZIMBABWE: REAL SECTOR OVERVIEW
87. In 2010, economic prospects are bright, against the background of strengthened policies, favourable shocks, notably
higher international commodity prices and a good 2010 agricultural season.
88. The economy registered a growth of 5.7% in 2009 and is projected to grow by a further 5.4% in 2010. The economy’s
robust performance is due to a diversity of positive factors and favourable shocks, notably, higher international
commodity prices for gold and platinum and a better than expected 2010 agricultural season.
89. Zimbabwe benefited immensely from the rebound in global economic activity, wherein the global economy is expected to
grow by 4.3% in 2010. This resulted in increased world trade, industrial production, and rising consumer demand.
90. The Zimbabwean economy, however, remains constrained by the following challenges:
I. Lack of External Support;
ii. Skills Flight;
iii. Energy Constraints;
iv. Limited Fiscal Space; and
v. Inadequate Levels of Liquidity.
91. The economy is projected to grow by 5.4% in 2010 underpinned by expected growths in mining (31%), agriculture
(18.8%), manufacturing (4.5%) and tourism and distribution (3.5%).
92. Social and services sectors are also projected to register significant growths as follows: education, 2%; health, 2%; and
domestic services, 1.5%.
93. The electricity and water sub-sector is, however, expected to decline by 1.8% in 2010, mainly as a result of challenges
being faced in electricity generation.
2010 Mid - Year Monetary Policy Statement
2010 Mid - Year Monetary Policy Statement

REAL GDP GROWTH (2000 TO 2010)
*Estimates **Forecasts
AGRICULTURE
94. Agriculture is projected to grow by 18.8% in 2010 compared to 14.9% in 2009. The growth is mainly a result of the following
increases in output: tobacco, 71%; dairy, 39%; horticulture, 14%; and maize, 5%.
MAIZE
95. Maize output is projected to increase from 1 240 000 tonnes in 2009 to 1 300 000 tonnes in 2010, as a result of an increase
in hectarage.
TOBACCO
96. Tobacco output is expected to increase to 110 million kilograms in 2010, up from 45 million kilograms produced in 2009.
This is based on the following:
I. Increase in the number of smallholder farmers producing the crop; and
Ii. Availability of inputs on the open market.
97. As of day 89, cumulative tobacco deliveries amounted to 92.9 million kgs at an average price of $3.02.
SUGAR
98. Sugar production is expected to decrease to 250 000 tonnes in 2010, from 286 000 tonnes in 2009. This is mainly a result
of the fact that the industry is currently carrying out a replanting exercise to replace old cane. The replanted crop will be
harvested after 10 months.
99. The following factors are, however, expected to improve sugar production:
I. Investment of R145 million in Triangle Sugar and Hippo Valley Estates, by Tongaat Hulett, with 70 million rand targeted
towards the two mills in the country and 75 million rand for the upgrading of the firm’s transport fleet. The company
expects to increase output to around 600 000 tonnes per year in the next three years; and
2010 Mid - Year Monetary Policy Statement
2010 Mid - Year Monetary Policy Statement

ii. The 45 million euros set aside by the European Union to revamp the country’s sugar industry announced in June 2009.
POULTRY
100. Poultry is expected to grow from 42 000 tonnes in 2009, to 50 000 tonnes in 2010. The increase is mainly driven by the
stability in the sector fostered by the multi-currency system.
101. The sector is expected to reach the 2007 levels by year end where it can supply 400 000 birds per day in line with
national demand. Currently the sector is producing about 270 000 birds per day with the deficit being satisfied by
imports from South Africa.
102. The figure below shows developments in the agricultural sector.
AGRICULTURE OUTPUT GROWTH (2001 TO 2010)
* Estimate
** Forecast
MINING
103. The mining sector is estimated to have grown by 8.5% in 2009. The sector is projected to grow further by 31% in 2010,
underpinned by output growths in all minerals.
104. Productivity in the mining sector is, however, expected to be weighed down by the following:
i. Erratic power supply; and
ii. Lack of funds for recapitalisation mainly due to the liquidity challenges in the economy.
2010 Mid - Year Monetary Policy Statement
2010 Mid - Year Monetary Policy Statement

MINING OUTPUT GROWTH (2000 TO 2010)
* Forecast
GOLD
105. Cumulative gold output as at 31st May 2010 amounted to 2 779 kilograms, compared to 712 kilograms recorded during
the same period in 2009.
106. During the first five months of 2009, most mines were still at early stages of resuscitating their operations after
suspending production due to challenges experienced prior to 2009.
107. The liberalisation of gold marketing has enabled some gold mines to resume production. In addition, the issuance of gold
dealership licences to gold producers has resulted in mining houses securing lines of credit, critical in increasing
production.
108. Annual gold production is therefore expected to increase from around 4 966 kilograms in 2009, to 7 000 kilograms in
2010 underpinned by the following factors:
i. Freda Rebecca Gold Mine is finalising a loan facility of US$10 million provided by the Industrial Development
Corporation of South Africa. The loan is expected to accelerate the implementation of the mine’s refurbishment
programme and working capital. This will increase its output to around 1 600 kilograms by the end of 2010;
ii. Metallon Gold has re-opened all its five mines and is targeting an output of around 3 200 kilograms of gold in 2010; and
iii. Caledonia is targeting a 45% growth following the improved economic environment that has rekindled its expansion
programmes. Output is projected to increase to 1 134 kilograms after the completion of its expansion programme in the
fourth quarter of 2010 despite persistent power outages.
2010 Mid - Year Monetary Policy Statement
2010 Mid - Year Monetary Policy Statement

GOLD DELIVERIES (2000 TO 2010)
* Projection
COAL
109. Coal production was at 20% of installed production capacity as at end of May 2010. Coal production in 2010 is therefore
expected to remain at around 1.7 million tonnes realised in 2009. Output is, however, expected to be influenced by the
following factors in 2010:
i. Anticipated re-capitalisation of Hwange Colliery Company;
ii. Increase in production as a result of the efficient use of the dragline; and
iii. Underground production will be boosted by the introduction of the second continuous mine.
COAL PRODUCTION (2000 TO 2010)
* Forecast
2010 Mid - Year Monetary Policy Statement
2010 Mid - Year Monetary Policy Statement

PLATINUM
110. Platinum has significant growth potential buoyed by the recovery in prices on the world market.
111. Platinum output is expected to increase from 6 849 kilograms in 2009, to 7 800 kilograms in 2010, due to the following
factors:
i. Increased investment by platinum houses;
ii. Increase in capacity utilization at Mimosa mining company; and
iii. Resumption of operations at Unki Mine in the last quarter of 2010.
PLATINUM PRODUCTION (2000 TO 2010)
* Forecast
NICKEL
112. Currently, there is no primary producer of nickel following the closure of BNC in October 2008. Nickel available is a byproduct of platinum group of metals (PGMs).
113. Nickel production is expected to increase from 4 858 tonnes, to 6 000 tonnes in 2010.
114. Bindura Nickel Mining Company is expected to start operations in the last quarter of 2010. Negotiations are underway to
start importing ore from Zambia and Botswana for smelting. In addition, increased activities in the Platinum Group of
Metals are also expected to boost nickel output.
MANUFACTURING
115. The manufacturing sector is estimated to have grown by 10.2% in 2009 and the sector is projected to post a lower growth
of 4.5% in 2010. Manufacturing production improved significantly from January 2009 to April 2010 due to:
i. Duty reduction on capital equipment;
ii. Positive benefits from the liberalized environment;
Iii. Introduction of multicurrency system iv. Access to lines of credit; and
2010 Mid - Year Monetary Policy Statement
2010 Mid - Year Monetary Policy Statement

v. Stability of the macroeconomic environment that fosters long term planning.
MANUFACTURING OUTPUT GROWTH RATES (2000 TO 2010)
*Estimate
** Forecast
116. Overall capacity utilization in the manufacturing sector has grown from an average of around 10% in January 2009 to the
current average of around 37%. The low levels of capacity utilization are due to suppressed power supplies and lack of
access to cheap and long term lines of credit among other factors.
117. The manufacturing sector continues to face the following challenges:
i. Insufficient working capital;
ii. Obsolete equipment;
iii. Infrastructural bottlenecks especially in the utility distribution sectors;
iv. Punitive borrowing interest rates;
v. Relatively low effective demand; and
vi. High customs duty on finished products that are used as raw materials in some industries.
MANUFACTURING SUB-SECTORS
FOODSTUFFS INCLUDING STOCK FEEDS
118. Capacity utilisation in this sub sector increased from an average of 30% in the first half of 2009, to current levels of
around 40%. The sector is expected to grow by 5% in 2010.
DRINKS, TOBACCO & BEVERAGES
119. Capacity utilisation in the drinks, tobacco and beverages sub-sector increased to more than 80% for some firms during
the period January 2009 to April 2010.
2010 Mid - Year Monetary Policy Statement
2010 Mid - Year Monetary Policy Statement

120. Delta Beverages and British American Tobacco are currently operating at full capacity. Delta is in the process of
installing a new 42 000 capacity bottling plant in Bulawayo at a cost of US$14 million. The plant is expected to be
commissioned in October 2010.
METALS AND METAL PRODUCTS
121. The performance in metals and metal products is expected to remain subdued on the back of the poor performance by
ZISCO Steel and stiff competition from regional players.
INFLATION DEVELOPMENTS
122. Rising international oil prices, appreciation of the Rand, energy shortages and attendant supply side bottlenecks have
contributed to the recent build-up of inflationary pressures in the economy.
123. The annual headline inflation increased from 4.8% in April 2010 to 6.1% in May 2010, before thawing down to XX% in
June 2010, reflecting increases in both food and non-food inflation, which rose from 5.2% in April to 6.7% in May and
from 4.6% in April to 5.8% in May 2010, respectively. 124. On a monthly basis, inflation increased to 0.3% in May 2010,
from 0.1% recorded in April 2010.
ANNUAL INFLATION PROFILE (%)

125. The country’s inflation remains within the regional average of about 6%, a development, which ensures external
competitiveness.
2010 Mid - Year Monetary Policy Statement
2010 Mid - Year Monetary Policy Statement

ANNUAL INFLATION FOR SADC COUNTRIES AND USA (%)
Zimbabwe Botswana
Mozambique
Tanzania Zambia
SA
USA
Malawi
Dec 2009
-7.7


Jan 2010

Feb 2010

Mar 2010
3.6


Apr 2010

May 2010

126. In the outlook period, inflationary pressures will largely emanate from the following sources:
i. High utility charges;
ii. Rising oil prices; iii. Further appreciation of the Rand;
iv. Pressure on wages; and
v. Money illusions and psychological hangovers where sellers of goods and services are taking time to appreciate the true
value of hard currencies, and hence escalate prices disproportionately.
LESSONS ON INFLATION
127. The recent upsurge in inflationary pressures in an environment where there is absolutely on printing of money clearly
corroborates the position the Reserve Bank has been making over the past six or so years which position is that the
impulses of inflation are ignited by much more fundamental factors than just money supply.
128. Milton Friedman (1945)’s proclamation that “inflation is always and everywhere a monetary phenomenon” is therefore,
an academic constant that holds no water in reality.
129. Lasting stabilization of inflation, therefore depends on our ability as a country to address the following factors:
(a) Working hard to improve business investors’ and consumers’ expectations through the establishment of a vibrant stable
macro-economic environment. A positive psychological outlook fortifies low and stable inflation through actual change
in individual and corporate pricing/costing and demand and supply behaviours;
(b) Eradication of the perennial hurdles on the matrix of enablers in the production chain. Stability of electricity supply;
smoothening of telecommunication systems. a complete revamp of NRZ and Hwange capacities; creation of a robust
cargo airfreight system and upgrading of our road network systems as well as improved water availability in the built
environment would all add on the greater supply side response.
(c) General increase in capacity utilization across the economy’s key sectors of production through enhanced inputs
supplies and technical support systems; and
(d) Coordinated restraint on wage increases, particularly in the private sector and the agricultural sector
2010 Mid - Year Monetary Policy Statement
2010 Mid - Year Monetary Policy Statement

MONETARY DEVELOPMENTS
130. The country’s financial intermediation has deepened as reflected by growth in broad money (M3) and gradual
improvement in lending activities to the productive sectors of the economy.
131. In the first half of the year, M3 increased from US$1.4 billion in January to US$1.8 billion in May 2010. The main sources
of liquidity have been gold sales, tobacco finance facilities, workers remittances and other off-shore lines of credit.
BROAD MONEY (US$ BILLION)

132. The short term nature of deposits is, however, of major concern as it is not supportive of long-term lending to the
productive sectors of the economy. Short term deposits account for over 90% of total deposits, reflecting low income
levels, high bank charges and the inclination towards a cash economy.
133. Credit to the private sector has grown moderately from US$759.6 million in January to US$1 012.2 million in May 2010,
benefiting distribution (21.7%), manufacturing (18.6%), agriculture (17.4%), services (15.7%) and mining (9.9%).
DISTRIBUTION OF CREDIT TO THE PRIVATE SECTOR
2010 Mid - Year Monetary Policy Statement
2010 Mid - Year Monetary Policy Statement

134. Reflecting the structure of deposits which is heavily skewed towards short term deposits, the loans to deposit ratio
currently at 52%, remains well below best international benchmark of 70-90%.
135. Banks have been reluctant to over expose themselves by lending on a long term basis particularly in the absence of the
lender of last resort function of the Central Bank and relatively inactive interbank market.
136. Punitive lending rates of around 30% per annum being offered by some local banks are also prohibiting borrowing by the
productive sectors. The current levels of lending rates are significantly higher than prime lending rates of 10% prevailing
in South Africa, which has a comparatively developed financial system in the region.
137. This situation has been worsened by the absence of money market instruments such as Treasury bills (TBs), which has
left banks without securities to use as collateral. Most interbank transactions are, therefore, secured by banker’s
acceptances. The market generally prefers to use Government securities especially Treasury Bills.
STOCK MARKET DEVELOPMENTS
138. Stock market activity has remained subdued in 2010, largely reflecting liquidity constraints, particularly in the absence of
balance of payments and budget support, coupled with subdued export performance. 139. Since February 2010, the
stock market has exhibited a downward trend reflecting low investor confidence. Most foreign investors moved out of
the stock market largely due to the perceived country risk.
MARKET CAPITALIZATION (US$ MILLIONS)
140. Reflecting these, market capitalisation declined from US$3.97 billion in January 2010 to US$3.19 billion in June 2010.
141. The industrial index registered a 19.2% decline since December 2009 to June 2010, which largely reflects liquidity
challenges facing industries.
2010 Mid - Year Monetary Policy Statement
2010 Mid - Year Monetary Policy Statement

INDUSTRIAL INDEX

142. The mining index has also performed poorly, despite the recovery in the international prices of minerals.
MINING INDEX
EXTERNAL SECTOR DEVELOPMENTS
143. In 2010 the external sector position has been improving, benefiting from high demand as the global economy recovers,
higher export prices, general macroeconomic stability, increased capacity utilisation and improvement in capital flows.
Investment in key export sectors, however, remained handicapped by inadequate infrastructure, energy shortages and
high operational costs exacerbated by wage pressures.
144. The current account deficit is projected to reach 21.1% of GDP from the 17.1% of GDP recorded in 2009. Dependence
on donor aid has also increased significantly, with current and capital transfers through NGOs estimated at 12% of GDP
in 2010.
2010 Mid - Year Monetary Policy Statement
2010 Mid - Year Monetary Policy Statement

145. On the capital account, the country faces significant capital account vulnerabilities. The country has been unable to
attract significant long-term capital flows, relying instead on short-term flows which are more vulnerable to sudden
changes.
BOP FINANCING 2005-2010 (% OF GDP)

146. Furthermore, increased uncertainty about indigenization legislation slowed capital inflows and deteriorated investors’
confidence, which has added further pressure to the already vulnerable external position.
EXTERNAL DEBT
147. The country’s total external debt amounted to US$6 432 million in June 2010, compared to US$5 667 million in
December 2009. The increase in external debt is attributed to short-term borrowings by the private sector, capitalization
of interest on external payment arrears.
EXTERNAL DEBT AND PAYMENT ARREARS (US$ MILLION)

DOD
Total Arrears
Principal Arrears
Interest Arrears
TOTAL DEBT

Public &publicly guaranteed 6 089.0

4 452.1
3 724.5
689.8
Government Long Term 3 818.6
2 263.8
1 721.5
538.5
Bilateral creditors

Paris Club

Non-Paris Club


Multilateral creditors

Parastatal Long Term

Bilateral creditors

Paris Club

Non-Paris Club


Multilateral creditors
327.3
283.0

187.5
76.2
Private Sector Long Term 87.0
39.9
33.0
1.4
SHORT TERM DEBT

Suppliers Credits

Reserve Bank


Private sector

Source: Ministry of Finance and Reserve Bank
2010 Mid - Year Monetary Policy Statement
2010 Mid - Year Monetary Policy Statement

EXTERNAL DEBT BY CREDITOR TYPE
148. About 38% of the country’s total debt is owed to multilateral creditors, while bilateral and commercial creditors are owed
36% and 26%, respectively.
EXTERNAL DEBT BY CREDITOR: 30 JUNE 2010

149. The Government remains the largest debtor accounting for 61% while parastatals and the private sector owed 34% and
5%, respectively.
EXTERNAL DEBT BY DEBTOR: 30 JUNE 2010
INTERNATIONAL COMMODITY PRICE DEVELOPMENTS
150. Commodity prices which reached their lowest levels in the first quarter of 2009 are on a rebound. As the global economic
and financial conditions improved through 2009, commodity prices steadily improved. The stronger than expected
global economic recovery and the increasing important role of emerging and developing economies in the global
commodities markets played a significant role in international commodities price improvements.
2010 Mid - Year Monetary Policy Statement
2010 Mid - Year Monetary Policy Statement

GOLD
151. Gold prices, which peaked at over US$1 200 an ounce in early December 2009, remained firm in the first half of 2010,
however the onset of July 2010 has seen prices of Gold declining by about 3%.
152. In the first half of 2010, gold prices benefited from a weakening US dollar. Since the beginning of the year, the US dollar
has depreciated against the six major trading partners’ currencies, a development which resulted in firming gold prices.

153. In July 2010, gold prices started easing following indications by the Chinese Central Bank that it would not be buying
gold for their strategic reserves. Furthermore, the increase in gold holdings by Bank of International Settlements (BIS)
reporting banks has led to the retreat in gold prices.
GOLD PRICE TREND
PLATINUM
154. In the first half of 2010, platinum traded at an average price of US$1 599 per ounce, almost 25% higher than the 2009
average of US$1 212 per ounce. The demand for platinum is estimated to have grown by about 3 percent in 2010,
mainly driven by the recovery in the global automotive industry particularly in China and the US. There is also strong
demand for platinum in the jewellery industry.
2010 Mid - Year Monetary Policy Statement
2010 Mid - Year Monetary Policy Statement

PLATINUM PRICE TREND
155. Reflecting this, platinum prices rose from about US$1 490 per ounce in January 2010 to US$1 524 per ounce in July
2010.
NICKEL
156. The increase in the price of nickel in the first quarter of 2010 from US$18 852 per tonne in January to a high of US$27 252
per tonne in April was partly driven the speculative buying from emerging economies, especially China and India.
157. Production constraints, including the strike at Vale in Canada, as well as project delays and production disruptions have
also resulted in higher prices.
NICKEL PRICE TREND

158. New capacity is, however, expected to come on stream in the second half of the year and push the nickel market into
surplus, thereby depressing prices in the second half of the year.
2010 Mid - Year Monetary Policy Statement
2010 Mid - Year Monetary Policy Statement

COPPER
159. During the first half of 2010, copper prices gained by 28% from an average of US$5 282 per tonne in 2009 to an average
price of US$7 184 per tonne in 2010. Increases in demand has been key to the metal’s price gains in the first half of
2010.
COPPER PRICE TREND
160. An anticipated slow recovery in the US economy, and the construction sector in particular; and a likely build up of global
inventories is, however, expected to adversely impact on copper prices in the medium term.
CRUDE OIL
161. The rally in international crude oil prices in the fourth quarter of 2009 spilled over into the first half of 2010. Crude oil
prices increased by 8% buoyed by demand from emerging economies, especially India and China. The general
recovery in global economic activity also spurred oil prices.
CRUDE OIL PRICE TREND
2010 Mid - Year Monetary Policy Statement
2010 Mid - Year Monetary Policy Statement

162. The rise in crude oil prices in the first quarter prompted producers to increase production. Supply remains plentiful with
global inventories at end of May 2010 at 97 days supply, 9 days higher than the 5-year average.
163. The increase in crude oil supplies, coupled with low demand in the major consuming countries in the second quarter of
2010 adversely impacted on prices which declined from a peak of US$87 per barrel in April to about US$75 per barrel at
the beginning of July.
SHORT-TERM TRADE FINANCE FACILITIES
164. External Loans Coordinating Committee approved short-term trade finance facilities for 23 companies amounting to
US$737.6 million, during the first half of 2010.
165. This compares with approvals for 32 companies during the same period in 2009 amounting to US$625.9 million.
166. Afreximbank, Standard Chartered Bank London, PTA Bank, Tian Li and some South African banks are the major
lenders accounting for over 60% of the approved credit lines to Zimbabwe.
167. Due to sanctions, Standard Chartered Bank London mainly lends through syndicated facilities through Afreximbank and
PTA Bank.
SUMMARY OF APPROVED SHORT-TERM FACILITIES JAN - JUNE 2010
Sector
Number of Companies ELCC Approved Amount (US$ Million) Utilized Amount (US$ Million)
% Utilization
Agriculture

429.5
164.2
38%
Manufacturing

11%
Energy

83.6

19%
Mining

33.5

30%
Financial

19.2
25%
Total

737.6
222.4
30%
SUMMARY OF APPROVED SHORT-TERM FACILITIES JAN - JUNE 2009
Sector
Number of Companies ELCC Approved Amount (US$ Million) Utilized Amount (US$ Million)
% Utilization
Agriculture

10.6
6%
Manufacturing

105.3

13%
Energy

33.2

-
Tourism & Telecom

21%
Financial

270.4
25.2
9%
Mining

5.5
22%
Total

625.9
58.3
9%
168. The Agricultural sector, which accounted for US$429.5 million had the highest value of approved facilities, followed by
the manufacturing sector at US$115 million.
169. Approvals in the agricultural sector, largely reflects credit requirements by tobacco merchants given the on-going
tobacco marketing season, as well as the on-set of the cotton marketing season.
2010 Mid - Year Monetary Policy Statement
2010 Mid - Year Monetary Policy Statement

170. The energy sector accounted for a total of US$83.6 million. The other sectors had approvals of less than US$80 million.
171. Facilities approved for the financial sector were global facilities for banks, mainly for on-lending to their exporting and
importing clients.
SECTORAL LOAN APPROVALS FOR FIRST HALF 2010

SECTORAL LOAN APPROVALS FOR FIRST HALF 2009
UTILISATION OF SHORT-TERM TRADE FINANCE FACILITIES
172. Utilization of the approved facilities over the review period remained low at 30% or US$222.4 million.
173. This compares to utilization of 9% or US$58.3 million during the same period in 2009.
174. On a sectoral basis, utilization of the approved facilities continued to reflect the on-going marketing season for tobacco
and cotton. The agricultural sector, therefore, accounts for US$164.2 million or 74% of total.
2010 Mid - Year Monetary Policy Statement
2010 Mid - Year Monetary Policy Statement

Utilisation of ELCC Approved Facilities As At June 2010
175. The delay in the drawdown of approved facilities is largely due to the need for the borrowers to fulfil some conditions
precedent as lenders require ELCC approvals before their Board approvals.
176. In some cases, borrowers also find alternative funding through their foreign currency accounts and local borrowing
before they drawdown on the facilities.
177. Local industry requires long-term funding for recapitalization of their operations.
EXCHANGE CONTROL OVERVIEW
178. The Exchange Control liberalisation framework introduced in February 2009, has allowed for the free movement of
foreign currency in the economy and full Current Account convertibility. This is manifested through the removal of
restrictions on import payments and adoption of the multicurrency system.
179. The Government adopted this bold move on Current Account liberalisation in line with the SADC Protocol on Trade and
Exchange Controls which seeks to ensure current account convertibility among member countries by December 2010.
This is also consistent with the requirements of the International Monetary Fund (IMF) Articles VIII on the removal of
trade and exchange restrictions.
180. On the Capital Account, while restrictions on investment income remittances and procurement of external loans have
been removed, there is still management of the inward and outward flow of investment capital. The remaining
restrictions on the Capital Account will be gradually removed in a manner that creates a balance between curtailing
capital flight and the need to foster an investor-friendly environment that allows for the unfettered and free movement of
capital.
181. However, it is important to note that, the liberalisation of the Current Account has also resulted in increased foreign
currency leakages in the economy. This is evidenced by the imbalance arising from the mismatch between increased
export shipments and declining foreign exchange inflows into the market.
182. This Monetary Policy will, therefore, seek to review the existing administrative and monitoring mechanisms for
crossborder transactions with a view to curb the unwarranted externalisation of foreign exchange resources.
2010 Mid - Year Monetary Policy Statement
2010 Mid - Year Monetary Policy Statement

EXPORT PERFORMANCE FOR THE FIRST HALF OF 2010
EXPORT SHIPMENTS
183. For the period 1 January 2010 to 30 June 2010, total export shipments (declared on Forms CD1) amounted to US$871.9
million, compared to US$477.0 million declared during the same period in 2009, representing an increase of 82.8%.
184. The positive export performance recorded during the first half of the year was largely attributable to increased mineral
export shipments. On a sectoral basis, mineral export shipments accounted for 68.7% followed by tobacco exports
(16.6%), manufacturing (8.9%), agriculture (4.9%) and horticulture (0.9%).
Total Monthly Export Shipments (US$)
Month

Variance
%
variance
January

February

154,802,532
94,463,516

60,339,015
63.9
March


April


May


June

133,474,102
85,856,295

47,617,806
55.5
Total


Source: Computerised Export Payments Exchange Control System (CEPECS), RBZ
EXPORT PERFORMANCE BY SECTOR
MINING
185. For the period 1 January to 30 June 2010, mineral export shipments (including Gold and Diamonds) amounted to
US$598.9 million compared to US$207.6 million worth of exports for the same period in 2009. This represents a
significant increase of 188.6 %.
186. The surge in mineral export shipments was a result of increased gold export shipments due to the liberalisation of gold
trading and the attendant firming up of international metal prices.
Mineral Export Shipments (US$)
Month

Variance
%
variance
January
89,470,845
24,119,082

65,351,763
270.9
February

110,355,783
22,576,810

87,778,972
388.8
March


April

88,409,648
44,560,869

43,848,778

98.4
May

86,758,751
38,053,125

48,705,625
127.9
June

91,960,348
44,033,819

47,926,529
108.8
Total

598,958,337
207,566,943
391,391,393

188.6
Source: Computerised Export Payments Exchange Control System (CEPECS), RBZ
2010 Mid - Year Monetary Policy Statement
2010 Mid - Year Monetary Policy Statement

CONTRIBUTION OF MINERALS TO SHIPMENTS
187. Platinum continued to significantly contribute towards the total mineral shipments in 2010. The same scenario obtained
in 2009. Ferrochrome also contributed significantly to the total shipments in 2010.
Mineral Export Shipments, Jan–June 2009 & 2010 (US$)
Mineral

Variance
%
variance
Platinum

Ferrochrome

Gold

Diamond

Other

Total

Source: Computerised Export Payments Exchange Control System (CEPECS), RBZ
AGRICULTURE
188. For the period 1 January to 30 June 2010, total combined export shipments for the three agricultural sub-sectors namely
General Agriculture, Horticulture and Tobacco, amounted to US$192.4 million compared to US$188.2 million for the
same period in 2009. This represents a marginal increase of 2.2%
General Agriculture Export Shipments (US$)
Month

Variance
%
variance
January
7,795,392
9,822,562

(2,027,170)
(20.6)
February
7,576,235
11,989,970

(4,413,735)
(36.8)
March

6,901,200
9,615,813

(2,714,613)
(28.2)
April

4,738,423
6,098,234

(1,359,810)
(22.3)
May

3,766,099
8,916,200

(5,150,100)
(57.8)
June

10,416,177
12,532,636

(2,116,459)
(16.9)
Total

41,193,528
58,975,418

(17,781,889)
(30.2)
Source: Computerised Export Payments Exchange Control System (CEPECS), RBZ
189. The general decline (decrease of 30.2%) in exports of agricultural products is attributable to reduced commercial
national herd for production of beef, hides and dairy products. The poultry industry has also not performed well in terms
of production of commercial eggs and day old chicks.
190. In order to complement efforts by the Government to re-invigorate agricultural production in Zimbabwe, there is need for
deliberate National agricultural policy on training, supported by the availability of working capital support to farmers.
191. It is also critical that the country creates vibrant marketing frameworks that ensure that farmers are fairly rewarded for
their efforts.
HORTICULTURE
192. Total horticultural export shipments from 1 January to 30 June 2010 amounted to US$8.1 million, compared to US$6.6
million over the same period in 2009, reflecting a 23 % increase.
2010 Mid - Year Monetary Policy Statement
2010 Mid - Year Monetary Policy Statement

Horticulture Exports Shipments (US$)
Month

Variance
%
variance
January

February

March


April


May


June


Total


Source: Computerised Export Payments Exchange Control System (CEPECS), RBZ
TOBACCO
193. Total tobacco export shipments from 1 January to 30 June 2010 amounted to US$143.0 million, compared to
US$122.6 million for the same period in 2009, reflecting a 16.7 % increase
Tobacco Export Shipments (US$)
Month

Variance
%
variance
January

February

March

April

May

June

Total

Source: Computerised Export Payments Exchange Control System (CEPECS), RBZ
MANUFACTURING
194. Total export shipments for the manufacturing sector from 1 January to 30 June 2010 amounted to US$77.2 million,
compared to US$65.7 million for the same period in 2009, reflecting a 17.5 % increase.
Manufacturing Export Shipments (US$)
Month

Variance
%
variance
January
7,537,759
6,154,427

1,383,331
22.5
February
11,932,352
10,381,714

1,550,638
14.9
March

18,366,743
12,253,725

6,113,017
49.9
April
13,713,043
10,334,779

3,378,263
32.7
May
12,461,652
13,561,100
(1,099,447)

(8.1)
June


Total


Source: Computerised Export Payments Exchange Control System (CEPECS), RBZ
2010 Mid - Year Monetary Policy Statement
2010 Mid - Year Monetary Policy Statement

CROSS BORDER TRANSPORT
195. Exchange Control authorities continue to experience challenges of foreign currency leakages from the transport sector.
While systems have been put in place with authorised dealers to ensure full accounting of earnings from cross border
operations through the Form CD3, some transport operators continue to under declare their receipts to the prejudice of
the economy. In addition, some operators continue to engage in unauthorised offsetting arrangements with their
external partners.
196. For the first half of 2010, the value of freight services generated in foreign currency from transit, export and import cargo
declined by 22.8% in 2010, as compared to same period in 2009 as indicated in Table 8.
Transport Sector shipments (US$)
Month

Variance
%
variance
January

February

March

April

May

June
3,862,232
3,827,329
34,903 0.9
Total

Source: Computerised Export Payments Exchange Control System (CEPECS), RBZ
TOURISM
197. The 2010 FIFA World Cup has come and gone, and it is disheartening to note that market reports as at end June 2010,
do not indicate an increased inflow of foreign currency receipts from the Tourism sector.
198. Exchange Control authorities note with concern that there is generally lack of compliance with the requirement for
reporting of transactions at tourism operator levels. This is mainly attributable to the misinterpretation of liberalisation
objectives by Authorised Dealers and tourism operators. Monetary Authorities shall therefore put in place new
monitoring and reporting mechanisms for the Tourism sector to ensure full accounting of foreign exchange receipts.
199. For the period 1 January 2010 to 30 June 2010, recorded tourism receipts amounted to US$10 million, compared to
US$12.28 million realized during the same period in 2009. This represents a 12.3% decrease.

IMPORT PERFORMANCE FOR THE FIRST HALF OF 2010
GLOBAL IMPORT PAYMENTS
200. For the period 01 January to 30 June 2010, Authorized Dealers processed foreign exchange payments amounting to
about US$950 million for various imports. This represents a 47% increase compared to the figure of US$650 million
recorded over the same period in 2009.
2010 Mid - Year Monetary Policy Statement
2010 Mid - Year Monetary Policy Statement

Monthly Import Payments (US$)
Month

Variance
%
variance
January

February
185,174,656
136,030,489
49,144,167

36%
March

April

May

June

TOTAL

Source: Computerised Exchange Control Batch Application System (CEBAS), RBZ
201. Full current account convertibility has had a significant impact on the country’s cross border transactions, particularly
import payments. This is reflected in the increase in imports by about 50% over the six months in 2010 compared to the
same period in 2009. However, on a month on month basis, import payments declined by over 10% in June 2010, largely
due to liquidity challenges in the foreign exchange market.
202. An analysis of monthly trends for 2010 and 2009 shown in the graph below, affirms the above mentioned increase in
imports in the year 2010 except for the month June.
Monthly Import Payments
Source: Computerised Exchange Control Batch Application System (CEBAS), RBZ
IMPORT PAYMENTS BY SECTOR
203. Generally, there was an increase in the level of foreign payments across all sectors of the economy with the exception of
the services sector, which recorded a decline of 15% over the first half of 2010.
2010 Mid - Year Monetary Policy Statement
2010 Mid - Year Monetary Policy Statement

Import Payments by Sector (US$)
Sector

Change %
Change
Agriculture


Distribution, Retail & Individuals

Manufacturing

Mining

Services

TOTAL

Source: Computerised Exchange Control Batch Application System (CEBAS), RBZ
204. The increase in imports was largely attributable to increased importation of consumption goods by the retail and
distribution sector. This indicates that the country is still reliant on imported goods as capacity utilization in the
manufacturing sector has not reached levels that will result import substitution.
205. The Reserve Bank urges the relevant Government ministries to put in place policy measures that will promote
production by local industry and avoid deindustrialisation through over-reliance on imports of finished goods.
206. The Charts below show that services and mining sectors continue to account for more than 50% of the imports. This
shows that they are more active than other sectors of the economy.
Sectoral Distribution of Import Payments
Source: Computerised Exchange Control Batch Application System (CEBAS), RBZ
207. The increased import bill for the mining sector is explained by the sector’s recovery from the recession on the back of
firming metal international prices.
208. The Services Sector, while it shows a decline in 2010 compared to 2009, the sector continues to account for over 40% of
the country’s total import bill. This proportion in 2010 has largely been attributable to the boom in the mobile
communications subsector wherein mobile operators are expanding their network and hence the need for importation of
capital equipment and other consumables.
2010 Mid - Year Monetary Policy Statement
2010 Mid - Year Monetary Policy Statement

SOURCES OF FUNDING FOR IMPORTS
209. The liberalisation of the Current Account and adoption of the multi-currency system also resulted in the designation of
Foreign Currency Accounts (FCAs) that have become the main sources of funding for imports.
Global Import Payments by Source of Funds
Source

Change %
Change
FCAs

Interbank Loans
26,462,798

7,803,839
18,658,960
239%
Offshore Lines of Credit

TOTAL

Source: Computerised Exchange Control Batch Application System (CEBAS), RBZ
210. FCA balances continue to account for more than 65% of total funding for imports. The domestic money market
continues to face liquidity challenges owing to low deposit base (non-banking) and failure to access offshore lines of
credit.
Distribution of Payments by Source of Funds
Source: Computerised Exchange Control Batch Application System (CEBAS), RBZ
211. There is a notable increase in the percentage of imports funded from offshore lines, which account for about 30% of the
funding for imports. These lines of credit are a significant component of private capital flows and a reflection of improved
investor confidence in the economy, which is an important variable towards the country’s desired economic growth
targets.
IMPORT PAYMENTS BY CATEGORY
212. In terms of goods being imported, services continue to account for more than 50% of import payments. This can be
attributed to increased demand for technical services by the telecommunications and mining sectors. The table and
chart below show the distribution of imports by category of goods and services.
2010 Mid - Year Monetary Policy Statement
2010 Mid - Year Monetary Policy Statement

Imports by Category of Goods/Services
Category

Change %
Change
CAPITAL GOODS

RAW MATERIALS

CONSUMABLES

SERVICE FEES AND CAPITAL PAYMENTS 465,647,992
352,418,138
113,229,853
32%
Source: Computerised Exchange Control Batch Application System (CEBAS), RBZ
Distribution of Imports by Category
Source: Computerised Exchange Control Batch Application System (CEBAS), RBZ
FOREIGN CURRENCY REMITTANCES
213. As at 30 June 2010, the Reserve Bank licensed a total of 32 bureaux de change. With the advent of the multi-currency
system, most bureaux transformed their operations to engage in inward money transfers, as bureau de change
business became limited. Furthermore the liberalisation of the current account transactions allowed for the unfettered
and free flow of foreign currency remittances from the diaspora, hence an increase in inward bound money transfers.
214. For the period 1 January 2010 to 30 June 2010, remittances from the Diaspora into Zimbabwe through Bureaux de
Change were USD112.2 million representing about 40% increase when compared to USD80.8 million for the same
period in 2009.
Remittances for 2007, 2008, 2009 and 2010 (US$m)
Month

January

February

March

April

May

June

TOTAL
11.4
41.6
80.8 112.2
Average Monthly Remittances

Source: Bank Application System (BSA), RBZ
215. The table above depicts that over the period 2007-2010, the average monthly remittances from the Diaspora has been
on the increase from about US$2 million per month during the first six months of 2007 to about US$20 million a month
over the same period in 2010.
2010 Mid - Year Monetary Policy Statement
2010 Mid - Year Monetary Policy Statement

216. It is important to note that a significant portion of these funds are not banked and the banking sector is urged to introduce
innovative financial products that would effectively encourage individuals to deposit their diaspora receipts with the
banking system.
Money Transfer Receipts US$ m
EXCHANGE CONTROL POLICY MEASURES
EXTERNALISATION
217. The past decade has been characterised by a continuous decline in the country’s foreign exchange reserves, a
development that has helped protract the economy’s growth prospects.
218. The decline in reserves has not only been exacerbated by lack of international BOP support, but sadly, also driven by
foreign currency leakages propagated by some corporate and individual engagement in ills that promote foreign
currency externalisation.
219. Serious economic crimes of this nature, only but retrogressively work to obstruct any national turnaround initiatives to
the detriment of the economy.
220. With foreign exchange remaining a key factor towards the sustainable recovery of the economy, the extermination and
non-perpetuation of this economic crime of foreign currency externalisation, becomes an imperative area of our focus
as Monetary Authorities.
221. For example, in the year ending 2009, the Joint BIS-IMF-OECD-World Bank statistics on external debt reported that
Zimbabwe had foreign assets in the form of deposits at BIS reporting institutions amounting to US$1.95 billion,
representing about 40% of the country’s GDP.
222. During the same period, official data from the country’s banking system, however, showed that cross border deposits at
correspondent foreign banks including BIS reporting banks amounted to US$339.4 million. This showed a discrepancy
of US$1.6 billion, which represents unrecorded balance of payments transactions of Zimbabwean financial resources
2010 Mid - Year Monetary Policy Statement
2010 Mid - Year Monetary Policy Statement

being banked offshore.
223. This amount if accounted for and recorded in the country’s balance sheet and becoming part of remittances back home,
will have long term benefits to the country.
224. Monetary Authorities outline hereunder policy measures to ensure significant accountability for the economy’s
resources and curb foreign currency leakages/externalisation.
WHAT IS FOREIGN CURRENCY EXTERNALISATION?
225. In its narrowest definition, foreign exchange externalisation is the illegal remittance/transfer or the holding of foreign
currency earnings generated using Zimbabwean resources, outside Zimbabwe.
226. Foreign currency externalization activities culminate in total prejudice to the economy, evidenced in the failure to ensure
receipt of a true and fair value from the application of an economy’s resources in and out of the country. It should be
borne in mind that where a resident applies the country’s factors of production in or outside the country, there should be
corresponding value attributable to the economy from the appropriation of proceeds arising from such an activity.
227. Where such funds are, however, held in other territories, Zimbabwe fails to realise gains that could have been achieved
from having such funds (assets) on its balance sheet, especially in cases where income earned from such holdings is
not remitted back into the country.
228. This, therefore, means that proceeds from exports of goods and services from Zimbabwe, income from offshore
investments (profits, dividends and royalties) initiated from Zimbabwe, and lines of credit approved for Zimbabwean
companies, should be as a matter of principle, always be repatriated for the benefit of the economy.
MEASURES TO COMBAT EXTERNALISATION OF FOREIGN CURRENCY
UNDER-INVOICING OR UNDERVALUATION OF EXPORTS
229. As a result of the liberalisation in administration of export documentation which came into effect in February 2009, some
unscrupulous exporters resorted to externalisation of export proceeds through under-invoicing or under-valuation of
exports. This under-invoicing or under-valuation of exports has affected the economy through: -
(i) persistent liquidity crunch in the market;
(ii) under-developed production base;
(iii) continued use of obsolete plant machinery ;
(Iv) lack of enhanced technology for production;
(v) high inflation.
230. As part of the efforts of curbing externalisation of export proceeds through under-invoicing, the Reserve Bank is in the
process enhancing the Computerised Export Payment Exchange Control System (CEPECS) to automatically flag
transactions that depict under-invoicing or under-valuation of exports.
231. In the same spirit, the Reserve Bank strongly urges the National Inspectorate Conduct Inspectorate (NECI) and the
Zimbabwe Revenue Authority (ZIMRA) to build the necessary capacity in order to curb under-invoicing of exports
through conducting aggressive pre-shipment inspections at all ports of exit.
2010 Mid - Year Monetary Policy Statement
2010 Mid - Year Monetary Policy Statement

RECOVERY OF OVERDUE EXPORT RECEIPTS
232. The current policy states that exporters are entitled to the full value (100%) of their export proceeds which are expected
to be brought into the country within a statutory period of 90 days from the date of export or when contractually due. For
a period beyond 90 days, prior Exchange Control approval should be sought from the Reserve Bank.
233. As Monetary Authorities, we are, however, concerned that some exporters have continued to illegally keep export
proceeds in unapproved offshore accounts in order to avoid the necessary taxes on their earnings which are due to
the fiscus.
234. In order to curb the illegal practice of keeping export proceeds in unapproved offshore accounts, all exporters with
overdue export proceeds shall continue to be red-flagged in the CEPECS system and such exporters would be
subjected to a higher Form CD1 Accessing Fee of US$50.00 per Form CD1 as a default penalty.
235. Such exporters would thus, remain red-flagged in the CEPECS system until they have cleared their overdue status.
OVER-INVOICING OF IMPORTS
236. Over-invoicing of imports relates to acts of connivance involving importers and their suppliers in deliberately inflating the
value of imports in a bid to externalise the excess foreign currency resources that would have paid.
237. The Reserve Bank has formulated the following strategies to deal with cases of over-invoicing of imports: -
i. working closely with ZIMRA for the establishment of an import valuation database covering all the country’s major
imports from diverse source markets.
ii. Regularly updating the database to ensure the establishment of a comprehensive import valuation database to allow for
the checking of import values stated on the suppliers invoice against the internationally acclaimed value of such imports
238. In order to arrest the continued acts of externalisation, without re-introducing restrictions on import payments, the
Reserve Bank shall enhance its monitoring framework for all foreign payments, which must be reported on the
Computerized Exchange Control Batch Application System (CEBAS).
239. In addition, where goods and services have been paid for, confirmation of receipt of value of such goods and services
through necessary documentary proof, such as Bills of Entry (imports) etc. shall be required. Authorised Dealers will
therefore be required to build capacity to ensure submission and up to date acquittal of such documentation.
ACCOUNTING FOR EXPORT RECEIPTS FROM CROSS-BORDER TRANSPORT OPERATIONS
240. The current policy states that all local trucking companies who are holders of Bilateral/PTA permits and authorised
under the Road Motor Transportation Act [Chapter 13:15] to engage in cross-border transportation, are required to
complete a Form CD3 each time they cross the Zimbabwean border.
241. The completion of the Form CD3 is for balance of payments reporting purposes as well as to ensure that all crossborder transporters hauling goods on behalf of foreign entities are paid in denominated currencies and the funds
are received through normal banking channels in Zimbabwe.
2010 Mid - Year Monetary Policy Statement
2010 Mid - Year Monetary Policy Statement

242. Despite the liberalisation of foreign exchange regulations, the cross border transport industry seems to have some
persistent motives of externalizing foreign currency, hence the following leakage areas of foreign currency.
i. Offsetting of Freight Receipts – It is generally acknowledged that transporters encounter some incidentals which
include breakdowns, maintenance, tyre bursts and refuelling in a foreign country which needs to be paid for
urgently. Since they may not have ready cash, the transporters end up offsetting expenses against revenue with
their foreign agents. Such transactions, however, pose formidable challenges in trying to authenticate the claims
being made as to the level of expenditure relative to gross freight earnings.
Ii. Defaulting in Freight Payments - There is high default rate in the acquittal of Forms CD3 from some transporters. These
transporters have since changed ownership, closed down, disappeared or are denying ownership of the raised Forms
CD3, hence incidences of externalisation.
243. Monetary Authorities are concerned that, in order to avoid paying the necessary taxes on their earnings, the majority of
cross-border transporters have continued to illegally retain export proceeds in unauthorized offshore accounts, set up
illegal offshore companies as well as engaging in illegal offsetting arrangements for procurement of fuel, spare parts
and foreign services.
244. In order to curb the illegal practice of keeping export proceeds in unauthorized offshore accounts, all cross-border
transport operators with overdue export proceeds shall continue to be red-flagged in the CEPECS system. Such
exporters shall be subjected to a higher Form CD3 Accessing Fee of US$50.00 per Form CD3 as a default penalty.
245. Furthermore, there is a growing tendency by local transport operators to couple their local machines with foreign trailers
or vice-versa, purportedly on a temporary basis. The net result of such is the reduction of the freight revenue that should
accrue to the economy as the hire charges on the foreign asset always have the first claim on the Zimbabwe gross
amounts.
246. In order to curtail this form of externalisation, Monetary Authorities shall require that such contracts be registered with
Exchange Control. All foreign registered trailers coupled to local horses and vice-versa shall be required to produce the
relevant authority documents at port of entry/exit.
ACCOUNTING FOR EXPORT RECEIPTS FROM PRECIOUS MINERALS
247. Zimbabwe is well-endowed with precious minerals such as Gold, Diamonds and Platinum Group of Metals (PGMs),
among several others. In order to fully account for proceeds from exports of rough and polished Diamonds, with
immediate effect, all exports of Diamonds shall require documentary evidence of official valuation of the same before
issuance of a Form CD1. This is the same arrangement with the export of Gold.
ACCOUNTING FOR TOURISM EXPORT RECEIPTS
248. Due to the regional exposure arising from hosting of the World Cup in Africa, significant tourism potential for the
economy has been unlocked.
249. In order to fully account for all such tourism receipts the Reserve Bank, in consultation with the relevant stakeholders in
the tourism sector shall introduce an enhanced web-based and user friendly Tourism Receipts Accounting System to
replace the current Form TR1 which has been rendered ineffective due to the adoption of the multicurrency system.
250. The new Tourism Receipts Accounting System (TRAS) shall be designed to ensure the timeous recording of earnings in
2010 Mid - Year Monetary Policy Statement
2010 Mid - Year Monetary Policy Statement

the Tourism Sector from both local and foreign tourists and the principles of data collection shall be in line with
international best practices.
SMUGGLING OF GOODS AND OTHER PRECIOUS MINERALS
251. As Monetary Authorities, we have noted with concern that there has been a rampant smuggling of goods out of the
country by individuals and corporate entities. This involves illegal export of undeclared goods through the official and
unofficial ports of exit.
252. The adverse effects of smuggling of goods (externalisation of foreign exchange earnings) results in loss of revenue to
the Fiscus, adversely impacting on the country’s economic growth prospects.
253. There is, therefore, need for the relevant Government Departments and Law Enforcement Agents tasked with manning
the national borders to enhance capacity to conduct spot checks on individual company production levels with
corresponding export shipments.
AUTHORISED OFFSHORE ACCOUNTS
254. As part of the Reserve Bank’s mandate to constantly create an environment that is facilitative of foreign investment, the
Bank allowed the operation of offshore accounts as a way of providing comfort to foreign investors, protection of capital
investments and also ensuring the availability of foreign currency for local operations. Authorised offshore accounts
have largely been allowed for large mining houses, especially in the platinum, gold and diamond sectors.
255. While this framework is designed to bring security to the investors, the economy has not fully benefited from having such
funds deposited offshore.
256. In order to ensure that there is a win-win arrangement from this dispensation and to guarantee the timely accounting of
export proceeds deposited offshore under this scheme, Monetary Authorities shall now require the Administrative/
Managing Banks to open mirror accounts. These accounts shall reflect daily transactions on the offshore account and
reporting to Exchange Control shall be on a weekly basis.
257. In addition, to enhance the reporting requirements, the actual bank statements for the offshore account shall continue to
be submitted to the Reserve Bank on a monthly basis.
INTERNAL AND OUTWARD MONEY TRANSFERS
258. Current policy on money transfers is limited to inward bound remittances and all outward money transfers can only be
done through Authourised Dealers. Licenced bureaux who wish to partake in additional products which involve outward
remittances may do so through Authorised Dealers of their choice.
259. In addition, inorder to enhance the expanded framework of operation of Money Transfer Agencies (Bureaux), the
Reserve Bank shall now allow licenced companies to do internal transfers.
260. This system shall entail the transmission of funds within Zimbabwe and across towns and cities. Bureaux wishing to
engage in this business shall be required to submit proof of capacity, in terms of foreign exchange availability and
systems effectiveness, to the Reserve Bank.
2010 Mid - Year Monetary Policy Statement
2010 Mid - Year Monetary Policy Statement

MEASURES TO FACILITATE FOREIGN INVESTMENT

STREAMLINING OF INVESTMENT PROCEDURES
261. Foreign investment flows play an important role in the turnaround of the economy.
262. In the past decade, FDI has come to play a major role in the internationalization of business. The change in trade and
investment policies and the regulatory environment globally in the past decade, including trade policy and tariff
liberalization, easing of restrictions on foreign investment and acquisition in many nations, and the deregulation and
privatization of many industries, has probably been the most significant catalyst for foreign investment’s expanded role.

263. It is in this respect that as Monetary Authorities, we remain committed to the establishment of an investor-friendly
environment that fosters the free and unfettered movement of capital into and out of Zimbabwe to ensure that
investors who choose to bring their capital to Zimbabwe are able to realize value from their investments.
264. To that end, Exchange Control has removed controls on the remitability of income from investments which has seen
profits and dividends becoming freely remittable. In addition, in order to guarantee expeditious processing of proposals
involving foreign participation in existing local entities, all investment applications below US$5 million will now be
processed by Exchange Control under advice to the Exchange Control Review Committee.
265. This intervention will speed up the turnaround time in processing applications.
266. This and other initiatives being implemented by other relevant Government departments such as implementation of a
one- stop shop for investment approvals, will culminate in a wholesome reduction in the time lag of processing
investment applications thus further enhancing Zimbabwe’s status as a favourable investment destination.
PROMULGATION OF EXCHANGE CONTROL REGULATIONS
267. The liberalized regime requires a review of the current Exchange Control regulatory framework to ensure the
promulgation of a legal backing that is supportive of this liberalized and multicurrency system.
268. It is therefore, imperative that the existing regulatory framework be amended to reflect this regime and to that end, we
are pleased to announce that the existing Exchange Control rules and regulations have been amended accordingly and
are now awaiting gazetting, once all outstanding processes have been completed.
NATIONAL PAYMENTS SYSTEM
269. The National Payment System remains sound and efficient, in line with current efforts to deepen the Reserve Bank of
Zimbabwe’s oversight function. The National Payments System was successfully re-configured to process transactions
in United States Dollars. Major milestones in this regard were:
i. The successful conversion of the Real Time Gross Settlement (RTGS);
ii. The re-introduction of the inter-bank cheque payment stream;
iii. The re-alignment of the Zimswitch platform for local card based transactions; and
Iv. The resuscitation of the VISA platform for international card based transactions.
2010 Mid - Year Monetary Policy Statement
2010 Mid - Year Monetary Policy Statement

REAL TIME GROSS SETTLEMENT (RTGS) SYSTEM
270. The RTGS system, which is primarily meant for high value high risk payments, continued to play a pivotal role as the
main settlement hub for most of the payment streams in the economy. The system recorded an average utilization level
of 99% of total settlement in value terms, during the period January to June 2010.
271. A cumulative total of 704 575 transactions valued at US$8.8 billion were processed through the RTGS system from
January to June 2010.
272. The monthly transactional activity in the system increased at a lower pace due to liquidity constraints prevailing in the
market.
INTER-BANK CHEQUE SYSTEM
273. A total of 68 748 cheques amounting to US$17 million were processed through the Harare and Bulawayo Clearing
Houses from January to June 2010. Cheque volumes increased at a monthly average of 15%, while values rose by
14%.
2010 Mid - Year Monetary Policy Statement
2010 Mid - Year Monetary Policy Statement

CARD PAYMENT SYSTEM (ATMS/POS)
274. Volumes and values of card based transactions increased at a monthly average of 68% and 10% respectively.
275. The cumulative volume of card transactions during the period under review was 481 503 amounting to US$77.4 million.
Of this amount, ATMs constituted 85%, while POS represented 15%.
MOBILE PHONE AND INTERNET BANKING
276. A cumulative total of 205 714 transactions valued at US$58 million were processed through the mobile and internet
banking platforms during the period under review. These transactions represent payments processed within (intrabank) individual banking institutions only.
POLICY GUIDANCE ON PAYMENT SYSTEM INITIATIVES
277. Policy efforts in payment systems modernization are focused on promoting the achievement of inter-operability of
electronic payments.
278. While great strides have been achieved in the large value payment system (RTGS), retail payment system still lags
behind as it remains fragmented and characterized by manual interventions.
279. To this end, the Central Bank encourages the banking community and other payment service providers to come up with
initiatives that promote the development of comprehensive electronic retail payment streams.
280. This will go a long way in enhancing initiatives that promote financial inclusion in the economy and the much needed
convenience to the transacting public. Financial institutions and other stakeholders are therefore encouraged to share
infrastructure as widely as possible in order to minimize costs and optimize usage of electronic means of payment.
281. Given that the current regulatory framework recognizes payment systems operated by financial institutions only, other
non-banking institutions are encouraged to work closely with the banking community in coming up with electronic retail
payment system products that cater for the un-banked population.
CENTRAL BANK’S ROLE OF PAYMENT SYSTEMS OVERSIGHT
282. The RBZ’s role as Overseer of payment systems in Zimbabwe is to ensure that the infrastructural components and the
markets for the provision of payment services:
I. work smoothly, efficiently and fairly for all participants and users;
ii. minimize and control the risk of transmitting shocks through systemic crisis emanating from the payment system; and
iii. pursue the level of technological and institutional development necessary to satisfy the payment needs for Zimbabwe at
anyone point in time.
283. The scope of payment systems oversight in Zimbabwe is guided by the need to protect the customer as well as ensuring
that the systems are safe, practical and efficient for the economy. The scope of oversight therefore defines the breadth
and depth of oversight activities undertaken by the Central Bank in collaboration with other regulatory bodies.
284. The Bank’s payment systems oversight responsibilities extend to:
2010 Mid - Year Monetary Policy Statement
2010 Mid - Year Monetary Policy Statement

i. Recognized payment systems operating in Zimbabwe;
ii. Prospective payment systems operators;
iii. Systems that are considered important by the Bank and effect the transfer or withdrawal of money with the use of
payment instruments; and
iv. Retail payment systems which are widely used in the country such as cheque, internet, mobile phone and card payment
streams.
REGIONAL PAYMENT SYSTEMS INITIATIVE
285. As part of the ongoing modernization efforts in payment systems, the SADC Central Banks, through the Payment
Systems Project Team are working on Regional Integration of Payment Systems.
286. The Reserve Bank is actively participating in this initiative which seeks to harmonize all payment systems in the Region
given that the majority of central banks have launched RTGS systems in their respective countries.
287. The main objective of the harmonization initiative is to facilitate cross-border payments within the SADC region in line
with the SADC vision of fostering regional economic co-operation and integration.
CONCLUSION
288. Economic recovery prospects are bright. Strengthened policies and favourable external sector commodity price shocks
present immense growth opportunities for the country.
289. Supply side bottlenecks and energy shortages however remain a major stumbling block to the country’s economic
recovery prospects. These must be resolutely addressed to achieve maximum supply response.
290. The Reserve Bank of Zimbabwe will continue to undertake aggressive regulatory action to foster stability in the banking
sector as we work to play our part in the turnaround programme.
I thank you.
DR G. GONO
GOVERNOR