MONETARY POLICY STATEMENT


FOCUSING ON PRICE AND EXCHANGE RATE STABILITY

BY
JOHN P. MANGUDYA
GOVERNOR


RESERVE BANK OF ZIMBABWE
FEBRUARY 2020

TABLE OF CONTENTS
SECTION TWO: MONETARY POLICY MEASURES AND MPC
ECONOMIC AND FINANCIAL CONDITIONS UNDERPINNING

LIST OF TABLES

LIST OF FIGURES
Figure 11: Non-Performing Loans to Total Loans Ratio Dec 2014 – Dec 2019 43
Figure 14: Electronic Transactional Activities from January-December 2019 . 54

SECTION ONE: INTRODUCTION AND BACKGROUND

1.
This Monetary Policy Statement is issued in terms of Section 46 of the
Reserve Bank Act (Chapter 22:15). It discusses the measures and policies
being pursued by the Bank. The measures and policies are aimed at
accomplishing the Bank’s 2020 key strategic focus areas of ensuring
exchange rate and price stability, the smooth functioning of the interbank
foreign exchange market and providing support to economic activity without
endangering the important objective of reducing and stabilising inflation in
the short to medium term.

2.
The Statement comes at a time when the main thrust of the Bank is to stabilise
the economy by bringing down inflation and to stabilising it, after the initial
burst of high inflation that followed from the liberalisation of the exchange
rate and fiscal consolidation in 2019. Stabilising the negative shocks - cost of
adjustment - that emanated from the economic reforms that the country went
through in 2019 in its quest to right-size or rebalance the economy is
necessary for rebuilding confidence within the Zimbabwean citizenry and for
creating a conducive economic environment for sustainable growth.

3. Specific measures that the Bank is pursuing to stabilise the economy include:
i.
Implementing the monetary targeting framework geared at addressing
inflation and exchange rate volatility;
ii.
Enhancing transparency on the interbank market in order to provide
efficiency in the foreign exchange market;
iii.
Injecting additional cash to address cash shortages; and
iv.
Promoting confidence in
monetary
policy through
effective
communication and forward guidance to anchor the public’s

expectations, which are the epicentre of inflationary developments in
Zimbabwe.

4.
Consistent with the Bank’s policy thrust of ensuring exchange rate and price
stability, the economy managed to achieve a sustained decline in month-onmonth inflation since October 2019 and relative stability in the exchange rate.
This trend is consistent with a positive macroeconomic outlook for the
country which is set to grow by around 3% in 2020. Month – on – month
inflation is expected to be well below 5% by year-end.

5.
The Bank is committed to ensuring that the above fundamentals are achieved
through the Bank’s use of monetary targeting framework to achieve price
stability whilst at the same time addressing the emerging challenge of
depressed aggregate demand.

6.
Focussing on confidence building through effective communication by the
Bank has also become extremely important in view of the fact that a key
factor that causes inflation in Zimbabwe is people’s expectations of future
inflation. These non-monetary factors are grounded on the public’s past
negative experiences with inflation.

7.
In addition, the Bank is committed to improving the depth and efficiency of
the interbank foreign exchange market with a view to enhance its efficacy
and thus ensuring a credible, predictable and sustainable exchange rate
determination framework. This will produce stability and enhance confidence
in the foreign currency market.

8.
The current measures being pursued by the Bank are a culmination of policies
and decisions made by the Bank’s Monetary Policy Committee (MPC), and

communicated to the public through the past four press releases. The Bank is
pleased with the concerted effort of the MPC which has assisted to improve
policy transparency, predictability and certainty through its focus on the core
mandate of the Bank.

9.
The rest of the monetary policy statement is organised as follows: Section 2
provides the recent monetary policy measures, including decisions and
policies made by the Bank’s MPC. Section 3 discusses the general economic
outlook and inflation. The statement also includes Annexures highlighting
domestic and international economic developments underpinning monetary
policy decisions.

SECTION TWO: MONETARY POLICY MEASURES AND MPC
DECISIONS

10. In the Monetary Policy Statement of October 2019, the Bank made a number
of critical policy initiatives, which principally include liquidity management
framework, de-dollarisation process, reviewing
of minimum
capital
requirements of banks and the setting of the Bank policy rate. The Bank also
advised of gradually injecting additional notes and coins into the economy to
lessen the inconvenience caused by the shortages of physical cash to the
transacting public. In addition, the Bank introduced credit enhancing
measures to incentivise and encourage banks to lend long-term.

11. The policy measures that the Bank shall pursue in the conduct of Monetary
Policy are as follows:

Liquidity Management
12. The level of liquidity or money supply in the economy as measured by total
banks’ deposits stood at ZW$34.5 billion as at 31 December 2019, composed
of ZW$22.0 billion (64%) in local currency and ZW$12.5 billion (US$785
million) or 36% in foreign currency. It is this liquidity or stock of money that
is the key focus area that the Bank is mandated to manage to ensure that it
does not cause inflation and/or bring volatility to the exchange rate.

13. Focusing on liquidity management becomes even more critical especially in
the context under which around 50% of this ZW$34.5 billion is concentrated
on only 200 entities whilst the majority of the Zimbabwean population is
struggling to make ends meet in an economy with a huge output gap.

14. The Bank is therefore committed to the full implementation of the monetary
targeting framework to regulate the amount of money supply in the economy
and align it with the desired inflation and exchange rate levels. This
framework will be operationalised through the use of existing open market
operations tools that include Treasury Bills, Savings Bonds, Corporate
Bonds, Statutory Reserve Requirements and specific liquidity management
instruments to deal with the uneven distribution of deposits in the economy.

15. As at 31 December 2019, the outstanding Savings Bonds were ZW$1.9
billion, down from ZW$2.2 billion recorded over the same period in 2018.
The statutory reserve balances amounted to ZW$918 million as at 31
December 2019, representing 129% increase from the ZW$401.5 million
2018 position.

Enhancing the Reuters Forex Interbank Market Tracker System
16. The main aim of the Reuters foreign exchange market tracker system that the
Bank is putting in place is to improve the operation and efficiency of the
foreign exchange market through a more transparent foreign exchange
trading platform.

17. As advised by the Bank, the electronic deal tracker system under the Reuters
platform went live on a trial basis on 2 December 2019.

18. Accordingly, the next step is for banks to become market makers in the usertest environment to make sure that the new trading platform can handle the
tasks in the live environment.

19. The Bank shall set aside appropriate foreign exchange resources to intervene
and stabilize the market, as may be required once the enhanced interbank
foreign exchange market becomes operational.

20. The Bank is also undertaking a further refinement of the activities of bureaux
de change with an objective of strengthening their operations.


Credit Enhancing Measures
21. The MPC operationalised credit enhancing measures through the creation of
a Medium-term Bank Accommodation (MBA) window to support banks with
productive sector funding requirements. A total of ZW$800 million had been
disbursed under the MBA window as at 31 December 2019. This amount is
within the MPC’s initial target of ZW$1 billion agreed in 2019.

22. At its meeting on 14 February 2020, the MPC agreed to review the limit under
MBA window to ZW$1.5 billion in order to cater for the winter agricultural
preparations.

23. In administering this facility, the Bank shall ensure that appropriate measures
are put in place to limit its impact on inflation and the exchange rate. As
emphasized by the MPC, access to the MBA window depends on the quantum
of medium and long-term productive lending undertaken by banking
institutions.

24. In this regard, banking institutions are encouraged to re-orient their lending
portfolios to the productive sectors of the economy. Banking institutions are
further encouraged to partner with the private sector players across the value

chains, as part of the strategy to increase productivity and export earnings in
the national economy.

25. Financial institutions are also expected to increase their support to the micro,
small and medium enterprises (MSMEs) in order to deepen financial
inclusion. Support to the MSME sector has the potential to promote value
addition to the key sectors of the economy through diversification, export
earnings and import substitution, which are all critical for increased economic
output.

26. Implementation of the Collateral Registry by June 2020 will enable the
MSMEs to leverage on their movable assets to access funding from formal
financial institutions. In this regard, banking institutions and microfinance
institutions are required to submit to the Bank detailed strategies to support
the productive sector during the period 2020-2021. The strategy document
should be submitted to the Bank by 30 June 2020.

Bank Policy Rates
27. Following MPC deliberations, the Bank reduced its Policy Rate on overnight
accommodation from 70% to 35%, effective 20th November 2019, in order
to promote confidence in the economy and minimise non-performing loans.

28. At its meeting on 14 February 2020, the MPC resolved to maintain the Policy
Rate at 35 percent per annum.

29. The interest rate on the Medium-term Bank Accommodation (MBA) facility
was maintained at a level that reflects the yield on the open market for
Treasury Bills which is currently at between 15 to 18 percent per annum. The

Bank through the MPC will continue to proactively guide the market on the
expected path of interest rates as part of its efforts to build on policy
transparency and confidence.

Availability of Cash for Transactional Activities
30. Following the MPC decision in October 2019 to increase the quantity of bank
notes and coins in circulation to try and reduce the inconvenience being faced
by the public in accessing their cash at banks, the Bank has imported
additional bank notes and coins to ameliorate this challenge.

31. An additional amount of ZW$150 million was disbursed in the last quarter of
2019 to give a total of ZW$1.1 billion worth of notes and coins in circulation
in the country as at 31st December 2019. This ZW$1.1 billion represents 3.2%
of total banking sector deposits of ZW$34.5 billion as at 31 December 2019.
As per normal banking practice, the notes and coins were sold to local banks
for distribution to clients in exchange for RTGS balances, so as to neutralize
any expansion of money supply and therefore, inflation. Accordingly, the cash
injections to date have not increased money supply and thus managing
inflationary pressures.

32. The Bank will continue to gradually increase the notes and coins to the
desired optimal proportion of bank notes and coins in circulation of up to 10
percent of deposits agreed by the MPC to meet cash demand. Moreover, the
Bank will gradually introduce notes in larger denominations to improve
efficiency and convenience to the public.

Review of Minimum Capital Requirements
33. A strong capital base is pivotal to banking institutions’ ability to contribute
meaningfully to economic growth and development through effective

financial intermediation. More importantly, capital enhances a banking
institution’s capacity to cushion against losses. On-going reviews of
minimum capital levels ensure banking institutions continue to play a
meaningful role and contribute to the economic turnaround strategies of the
economy. Currently, the economy requires significant investment to retool
industry, including funding road construction and electrical power production
to facilitate industry activities.

34. Pursuant to the Bank’s MPC release of 22 January 2020, the minimum capital
requirements for the banking sector have been reviewed to ZW$ equivalent
of the following USD amounts:


Table 1: New Minimum Capital Requirements
Type of institution
Minimum Capital
Requirements in ZW$
Equivalent to :-
Tier 1 - Large Indigenous Commercial Banks &
all Foreign Banks
USD30 million
Tier II - Commercial Banks, Merchant Banks,
Building Societies, Development Banks, Finance
& Discount Houses
USD20 million
Tier III - Deposit-Taking Microfinance Banks
USD5 million
Credit Only Microfinance Institutions
USD25,000

35. The effective date of compliance with the new minimum capital requirements
is 31 December 2020. For new applications for bank or microfinance
licenses, the new minimum capital requirements are applicable with
immediate effect. Banking institutions are therefore required to submit capital
plans to the Bank by 30 June 2020, clearly indicating their chosen strategic

group as well as proposed strategies for compliance with the set capital
thresholds.

De-dollarisation Framework
36. Following the gazetting of Statutory Instruments 33 and 142 of 2019 that
provided the de-dollarisation framework for the country to trade exclusively
in local currency (mono-currency), the Bank is encouraged by the positive
de-dollarisation process that has been taking place in the country.

37. The Bank believes that the macroeconomic signals that include fiscal and
monetary discipline, prospects of positive economic growth and lower
inflation are improving to support a gradual de-dollarisation process within a
timeframe of 5 years. This is in line with other countries’ experiences on dedollarisation.

38. The foreign currency deposits as a proportion of money supply went down to
37% by 31 December 2019, whilst foreign currency denominated loans in the
banking sector stood at 22% of total banks’ loans and advances as at 31
December 2019.

39. The use of the local currency for transacting purposes has also continued to
go up, reaching a total amount of ZW$459.6 billion from 189 million
transactions for the full year 2019.


40. These measurements of the proportion of the use of the local currency in the
economy show that the country is on a right trajectory to de-dollarisation.

41. The Bank shall therefore continue to provide incentives to promote and
defend the use of the local currency within the economy in order to support
the de-dollarisation process

Use of Free Funds
42. The use of free funds in Zimbabwe has always been allowed since time in
memorial, it has remained virtually unchanged. The unfettered or
unrestrained use of free funds is in line with regional and international best
practice as free funds are outside the Exchange Control territory of the
country. Free funds play a catalytic role in enhancing confidence in the
foreign exchange market and in promoting economic development. They
constitute around 30% of Zimbabwe’s total export receipts.

43. Free funds are made up of diaspora remittances, funds remitted into the
country by international
organisations, embassies, non-governmental
organisations (NGOs), donations and any other funds realised by individuals
from offshore activities.

44. The Bank would therefore like to reassure all holders of free funds that their
funds are very safe and secure in Zimbabwe. The same is true for all other
foreign currency accounts and that the current export retentions are being
maintained at their current levels. The Bank has therefore no appetite at all to
temper with the legal status of the public’s foreign currency accounts.

45. Allowing the use of free funds within the national economy for the payment
of customs duties on selected products, paying for emergency passports,
procurement of basic commodities such as food items and fuel, under the
direct fuel (DFI) scheme, should not be misconstrued as going back to
dollarization, but rather, as common good for the country to promote the
inflow of free funds from the diaspora and necessary to buttress the
confidence that is needed under the de-dollarisation process.

Blocked Funds (or Foreign Currency Legacy Debt)
46. Government, through the Bank, is committed to orderly settlement of blocked
funds - cash flows generated in Zimbabwe by foreign entities that could not
be repatriated to foreign suppliers due to foreign exchange shortages - or
commonly referred to as foreign exchange legacy liabilities (or debt).

47. To date, Exchange Control has processed and validated blocked funds in an
amount of US$1.2 billion from 730 applications out of 1080 requests. Of
those processed, 299 transactions with a value of US$861 million were
rejected for various reasons ranging from double-dipping to lack of
supporting documentation. The balance of 350 transactions with a value of
US$457 million are being processed for finalisation by 29 February 2020.

48. The validated blocked funds exclude the legacy foreign exchange obligations
of US$361 million under the RBZ Debt Assumption Act.

Sustainable Financing & Climate Related Risks
49. Globally, sustainable finance has become one of the emerging issues in the
financial services sector, calling for integration of environmental, social and
governance standards into the process of providing financial services.

Sustainability standards facilitate strong corporate performance of financial
institutions and promote alignment of corporate strategies to national
development priorities.

50. To date, eight (8) banking institutions have embraced the Sustainability
Standards and Certification Initiative, which is being driven by the European
Organisation for Sustainable Development under the Global Sustainable
Finance Network. Meanwhile, the Bank shall develop a Sustainable Finance
Framework which will, inter alia, define the long-term objectives of the
country’s financial sector in relation to inclusive green financing and
sustainable financing.

51. Further, changes in global or regional climate patterns, with global warming
being the main aspect of climate change, is a current reality with most parts
of the world experiencing extreme weather conditions such as drought,
flooding and tropical cyclones. Zimbabwe has not been spared from the
vagaries of climate change and remains vulnerable. The economy’s mainstay
is agriculture hence the need to monitor and manage climate related risks.

52. The banking industry is not immune, given the potential wide-ranging
consequences from climate change. The effects of climate risk could impact
banks’ products that include loans and investments. This underscores the
need to manage climate related risk like any other significant risks and
integrating material climate change related risks and opportunities into
financial institutions’ business risks and investment decisions.

53. In the process of responding to the environmental and climate challenges,
there are both opportunities for growth and vulnerabilities for the financial
system. Boards of banking institutions are expected to expand their oversight

to include greater focus on promotion of inclusive and sustainable growth.
Against this background, banking institutions are required review their risk
management systems and ensure that they appropriately identify, measure,
monitor and control climate related risks.

54. The Bank shall provide guidance in terms of disclosure requirements in this
regard to ensure clear, comparable, and consistent information about the risks
and opportunities presented by climate change.

Financial Technology
55. Further to the advice in the 2019 Mid Term Monetary Policy Statement, the
Bank has embarked on several initiatives to establish the Fintech agenda. The
Bank is in the process of finalizing a regulatory sandbox framework. The
framework will outline the qualification, application and evaluation criterion
for entities to be admitted into the sandbox. The sandbox provides an
opportunity for innovators to connect to banks and other financial system
players. The operationalization of the framework will thus promote
competition and efficiencies through innovation.

56. Technology and innovations have significantly altered the financial
landscape and the way financial institutions offer services and products. In
this regard, banking institutions are required to upgrade their ICT systems
consistent with the developments in the Fourth Industrial Revolution. In
addition, banking institutions should explore new technologies and business
models to enable the institutions to compete in the digital age and come up
with innovative banking products.

Cyber –Security
57. As financial systems increasingly become more reliant on information
technology for delivery of products and services, there is heightened
probability of cyber-attacks. Given the highly dynamic cyber threat, banking
institutions are required on an ongoing basis to ensure that they have robust
ICT systems and sufficient safeguards to deal with cyber risks.

SECTION THREE: CONCLUSION AND OUTLOOK
58. The Bank is positive about the outlook of the Zimbabwean economy which
is expected to grow by 3% in 2020 on account of increased international
prices of key minerals produced in Zimbabwe, namely gold, platinum and
palladium, and coupled by the stable foreign exchange generation capacity of
the economy. The Bank is also confident that this year’s agricultural outturn
will be much better than initially anticipated due to improved rains received
in January and February in most parts of the country.

59. We are confident that the Bank’s policy mix whose key ingredients are
monetary discipline and an efficient foreign exchange market will be
effective in stabilising consumer prices and the exchange rate. The stable
exchange rate, is then set to anchor the country’s disinflation programme
through which monthly inflation is forecast to close the first quarter in single
digit levels of below 5%. This trend would see the year-on-year inflation
coming down to around 50 % by December 2020.

60. The confidence dividends from preserving the anchors of macroeconomic
stability, notably, inflation and exchange rate stability will help to manage
inflation expectations and foster a conducive environment for increased
production and productivity within the national economy, thus underpinning
the thrust of the 2020 National Budget.

I THANK YOU


JOHN PANONETSA MANGUDYA
GOVERNOR

ANNEXURE:
ECONOMIC
AND
FINANCIAL
CONDITIONS
UNDERPINNING MONETARY POLICY DECISIONS
GLOBAL AND REGIONAL ECONOMIC DEVELOPMENTS
61. Global economic activity is estimated to have slowed down in 2019, partly
due to slower global manufacturing and trade activity, weaker performance
in Europe and Asia, as well as the negative effects of the trade war between
the United States and China. Moreover, the prolonged uncertainty regarding
Brexit posed vulnerabilities to the Eurozone and the rest of the global
economy. In particular, the slower global manufacturing and trade activity
weighed down on commodity prices.

62. Accordingly, the International Monetary Fund (IMF), in its January 2020
update on the World Economic Outlook (WEO), estimated global growth for
2019 at 2.9%, down from 3.6% in 2018. Table 2 summarizes global economic
growth developments and prospects for selected regions and countries.

Table 2: Global and Regional Economic Growth & Outlook (%)


Estimate
Projection

World Output
3.6
2.9
3.3
Advanced Economies
2.2
1.7
1.6
US
2.9
2.3
2.0
Euro Area
1.9
1.2
1.3
Japan
0.8
1.0
0.7
Emerging Market & Developing Economies
4.5
3.7
4.4
China
6.6
6.1
6.0
India
6.8
4.8
5.8
Sub-Saharan Africa
3.2
3.3
3.5
Zimbabwe1
3.4
-6.5
3.0
Latin America & the Caribbean
1.1
0.1
1.6
Source: IMF World Economic Outlook (WEO): January 2020 Update


1 Zimbabwe growth rates are from Treasury, Reserve Bank & Zimstat

63. Global growth is, however, projected to improve modestly to 3.3% in 2020,
largely boosted by indications that manufacturing activity and global trade
are on a recovery path. In addition, a shift to accommodative monetary policy
in a number of advanced economies and positive US-China trade negotiations
and the conclusion of Brexit are expected to positively impact on global
growth. Downside risks in the form of elevated geopolitical tensions between
the United States and Iran as well as social unrest in other countries, however,
continue to linger and if they materialize, could result in dampening
sentiments and lead to lower global growth than projected.

64. Growth in advanced economies is estimated to have slowed to 1.7% in 2019
and is projected at 1.6% in 2020, mainly on account of a return to a neutral
fiscal stance in the United States and the civil unrest in Hong Kong. In
emerging market and developing economies, growth also decelerated to
3.7%% in 2019, from 4.5% in 2018 and is projected to improve to 4.4% in
2020. The growth in emerging markets and developing economies will be
anchored on a number of factors, including an improvement in the global
trade environment, as well as absence of geopolitical tensions in some
regions. In sub-Saharan Africa, growth is estimated to have improved
slightly, from 3.2% in 2018 to 3.3% in 2019 and is projected to further
increase to 3.5% in 2020, largely driven by growth in non-resource-intensive
countries.

65. Meanwhile, the Zimbabwean economy contracted in 2019 by an estimated
6.5%, weighed down by exogenous shocks in the form of the El-Nino induced
drought and the destruction caused by Cyclone Idai. These developments
compromised economic activities and electricity generation, with extended
effects on other sectors, pushing the economy into a recession. The situation

was aggravated by foreign currency shortages and constrained demand due
to the on-going fiscal reforms.

International Commodity Price Developments

66. International prices of major commodities increased in 2019. Base metals
posted price increases despite downswings during the year, occasioned by
supply factors in some markets, coupled with risks posed by the protracted
trade tensions between the US and China. In particular, nickel prices firmed
by more than 20%, largely due to strong demand for electric vehicles that use
batteries made from the base metal. Furthermore, the positive demand
outlook prompted by prospects of fiscal stimulus in China, the world’s largest
consumer of base metals, supported the prices of metals, including copper.

67. Precious metal prices were also strong and breached the US$1,500.00 per
ounce mark in the third quarter of 2019, supported by the safe haven demand,
as monetary policy easing by the Federal Reserve induced investors to shift
focus to gold bullion as a safe haven and alternative investment asset. In
addition, prospects of slower global growth and escalating trade tensions
between the US and China supported the firming up of prices of precious
metals. Figure 1 shows the evolution of international prices for selected
commodities for the period January to December 2019.

68. Brent crude oil prices were generally firmer during the year, largely on
account of tight supply conditions occasioned by production disruptions in
the Middle East and the decision by the Organization of Petroleum Exporting
Countries (OPEC) to continue with their production cuts. In addition, crude
oil production in the United States was weaker compared to levels attained in
2018.

Figure 1: International Commodity Prices: January - December 2019


Source: World Bank and Bloomberg, 2019

69. The World Bank projects oil prices to average about US$58.00 per barrel in
2020, about 3.4% lower than the 2019 average, primarily reflecting the
weaker global economic outlook, and therefore weaker demand for oil.


Jan
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
Nickel (US$/tonne)

Jan
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
Copper (US$/tonne)


Jan
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
Gold & Platinum (US$/ounce)
Gold
Platinum

Jan
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
Brent Crude Oil (US$/barrel)

BALANCE OF PAYMENTS DEVELOPMENTS AND OUTLOOK

70. The country’s Balance of Payment position showed signs of improvement,
with the current account improving from a deficit of US$1387.98 million in
2018 to a surplus of US$311.2 million in 2019. This was due to a sharp
decline in imports. Exports, however, registered a marginal decline. Some of
the hardest hit imports, however, are key inputs into the domestic production
process, such as chemicals and electricity.

71. Cumulative merchandise exports are estimated at US$4.5 billion for 2019,
about 3% down from US$4.7 billion in 2018, largely weighed down by lower
agriculture and mineral exports, tobacco and gold in particular. Sustained
power outages, persistent fuel shortages, foreign currency challenges and
high operational costs amid rising inflationary pressures, among other factors,
adversely affected production in the mining sector and consequently mineral
exports.

72. Merchandise imports contracted by about 27% to US$4.8 billion in 2019,
from US$6.6 billion in 2018. The contraction was largely attributable to
subdued economic activity and weak aggregate demand, mainly on account
of foreign currency shortages. Furthermore, the expenditure switching effects
that followed the liberalization of the exchange rate resulted in imports being
relatively more expensive and beyond the reach of some potential importers.

73. Food imports shrank significantly by 33.6% to US$299.4 million in 2019,
from US$451.2 million in 2018. The huge decline in food imports was largely
due to foreign currency shortages, which saw the country importing US$6.6
million worth of maize grain in the first three quarters of 2019, compared to
US$37 million in the first three quarters of 2018. Maize imports are,

however, estimated to have increased by 86.2% from US$37.9 million in
2018 to about US$70.6 million in 2019.Wheat imports declined by 42.5%,
from US$117.2 million in 2018 to about US$67.4 million in 2019. Similarly,
rice imports slumped by 52.5%, from US$125.4 million in 2018 to US$59.6
million in 2019.

74. Foreign direct investment declined from US$717.1 million in 2018 to
US$259 million in 2019. Similarly, net portfolio investment inflows declined
significantly from US$54.7 million in 2018 to US$3.7 million in 2019, the
decline in both FDI and portfolio investment was, in large part, due to
heightened perceived country risk.

75. Debt creating flows were also on the decline as most of the approved loans
contracted by Government were not disbursed because of accumulated
arrears. Private sector long and short term loan inflows also remained low,
marginally increasing from US$48.3 million in 2018 to US$49.3 million in
2019. This was in sympathy with both the contraction in the economy, which
reduced its ability to absorb additional loans and the high country risk mostly
associated exchange rate volatility.

Foreign Currency Receipts
76. The total foreign currency for the period January to December 2019
amounted to US$6.88 billion, compared to US$7.21 billion received during
the same period in 2018. This represented a 4.4% decrease in foreign currency
supply. The table below shows total foreign currency receipts by source.

Table 3: Foreign Currency Receipts (USD million)
Type of Receipt
Year 2019
Year 2018
%
Change
Export Proceeds

3,897.18
4,391.98
-11%
International
Remittances
Diaspora Remittances
635.43
619.25
2.6%
NGOs
521.16
570.26
-9%
Loan Proceeds

1,717.37
1,538.53
12%
Income receipts

62.63
63.18
-1%
Foreign Investment

54.27
24.58
121%
TOTAL

6,888.04
7,207.78
-4.4%
Source: Bank Supervision Application System, and Exchange Control Records

Gold Performance
77. Gold deliveries to Fidelity Printers and Refiners (FPR) for the period January
to 31 December 2019 were 27.66 tonnes, a decline of 17% from 33.29 tonnes
recorded during the same period in 2018. The national gold target for 2019
was 35 tonnes.

Table 4: Gold Deliveries to Fidelity Printers & Refiners (FPR) in Kgs

Primary
Small Scale
Total
Primary
Small Scale
Total
%
change
January

February

March

April

May

June

July

August

September

October

November

December

TOTAL
11,610.06 21,678.42 33,288.51 10,181.51 17,478.74
27,660.25
-17%

78. The decline is attributable to electricity challenges coupled with inadequate
equipment for small scale miners to access deep gold reefs and gold leakages
through smuggling.

79. Future efforts to increase gold deliveries to FPR shall include enhanced
capacitation of gold producers and formalisation of artisanal miners, coupled
with rigorous monitoring of gold production and marketing.
International Remittances
80. International remittances comprise transfers by International Organisations
for humanitarian assistance and the Zimbabwean Diaspora. Diaspora
remittances amount to USD635 million, a 2.6% increase from previous year
of USD619 million. International remittances received through the normal
banking system on behalf of International Organizations (NGOs) amounted
to USD521 million, a 9% decline from previous year of USD570 million.
Table 5 indicates diaspora remittances for period January – December for the
years 2018 and 2019.

Table 5: Diaspora Remittances Inflows 2018 and 2019 (Jan – Dec)
Month
Year 2019 (US$)
Year 2018 (US$)
% Change
January
44,567,757
52,908,760
-16%
February
41,778,076
52,666,687
-21%
March
62,414,369
57,448,487
9%
April
49,227,045
53,245,111
-8%
May
53,896,272
57,369,539
-6%
June
46,525,102
48,989,452
-5%
July
51,255,846
48,801,517
5%
August
51,493,743
51,957,976
-1%
September
52,538,456
46,488,027
13%
October
59,818,518
50,005,927
20%
November
54,353,351
46,329,214
17%
December
67,564,848
53,036,263
27%
Total
635,433,382
619,246,960
2.6%

Performance of Offshore Loans
81. The country’s ability to attract offshore lines of credit has remained curtailed
due to the perceived country risk. In 2019, a decline of 21% in the monetary
value of private sector external loans approved by Exchange Control, was
experienced compared to 2018 performance.

Table 6: Offshore Loans of Various Sectors

Balance of Payments Outlook
82. The current account is expected to remain in surplus in 2020 on account of a
recovery in exports and stable secondary income flows. In addition, foreign
exchange shortages and positive expenditure switching effects of the
liberalized foreign exchange regime are expected to result in compressed
imports, further supporting a current account surplus. The financial account
however, is expected to remain fragile characterized by huge scheduled
repayments for offshore facilities, against subdued inflows due to the
perceived high country risk. Non- debt creating inflows, notably, Foreign

Sector

Approved
Amount (US$
M )
Percentage
Sectoral
Contribution
Approved
Amount
(US$ M)
Percentage
Sectoral
Contribution
Agriculture

Financial

Energy

Transport

Mining

Tourism

Manufacturing

Construction

Retail

Services

Communication

0.00%

0.00%
TOTAL


Direct Investment (FDI) are also projected to remain low in the short term on
account of perceived country risk profile.

MONETAY DEVELOPMENTS
Reserve Money developments
83. Subsidies on fuel, electricity, grain and other essentials, particularly in the first
half of 2019, caused an increase in reserve money, which rose from Z$3.3
billion at the end of December 2018 to an estimated Z$8.8 billion in the last
week of December 2019.

84. The need to support domestic cash transactions also saw currency issued by
the Bank rising from Z$0.5 billion in December 2018 to Z$1 billion in
December 2019, thus partly contributing to growth in reserve money.

Figure 2: Reserve Money Developments (ZW$ billion)


85. Reserve money went down towards the end of December 2019.
Implementation of the monetary targeting framework saw month-on-month
reserve money growth declining from 19.1 % in November 2019 to 7.9% in
December 2019, and this trend is expected to continue into 2020.

Money Supply (M3) developments

28 Dec 18
25-Jan-19
22-Feb-19
22-Mar-19
19-Apr-19
17-May-19
14-Jun-19
12-Jul-19
9-Aug-19
2-Sep-19
6-Sep-19
12-Sep-19
18-Sep-19
24-Sep-19
30-Sep-19
4-Oct-19
10-Oct-19
16-Oct-19
22-Oct-19
29-Oct-19
4-Nov-19
8-Nov-19
14-Nov-19
20-Nov-19
26-Nov-19
2-Dec-19
6-Dec-19
12-Dec-19
18-Dec-19
27-Dec-19
Z$ Billion

86.
Over the year to December 2019, broad money (M3) grew by close to 250%
to reach Z$35 billion, from Z$10 billion in December 2018. The growth in
M3 reflected increases in negotiable certificates of deposits (NCDs),
316.46%; transferable deposits, 302. 32%; currency in circulation, 80.46%;
and time deposits, 25.12%.

Figure 3: Broad Money (M3) Developments


87.
Broad money was largely composed of deposits in domestic currency,
57.19%, while foreign currency deposits constituted 34.13% of the total, as
shown in Figure 4.

-

%
$ Billions
M3
M3 Annual Growth rate

Figure 4: Composition of Money Supply

Source: Reserve Bank of Zimbabwe, 2019

88.
In view of the tight monetary policy stance that the Bank has adopted,
signified by a strict reserve money program, money supply growth in the
economy is expected to be reduced to annual growth levels of around 60%
by end 2020, consistent with a projected real GDP growth of 3% in 2020.

89.
The Bank is committed to the implementation of the Monetary Targeting
Framework, and going forward, the Bank is targeting reserve money growth
of 10-15 percent by end 2020, which is consistent with end of year inflation
target of around 50%.


Local Currency
Transeferable
deposits
57.19%
Foreign Currency
Deposits
34.13%
Time Deposits
5.40%
Currency in
Circulation
2.59%
NCDs
0.70%

INFLATION DEVELOPMENTS
90. Monthly inflation consecutively declined for two months since reaching a
peak of 38.8% in October 2019 to 16.6% in December 2019. The slowdown
in monthly inflation was on account of the decline in non-food inflation,
which more than offset the moderate increase in food inflation. Figure 5
below shows the recent trends in month-on-month inflation.
Figure 5: Month-on-Month Inflation Profile (%)

Source: Zimstat, 2020

91. The observed peaks in inflation in June and October 2019, reflect exchange
rate adjustment shocks to the economy following the introduction of the new
currency as well as speculative attack on the currency. The containment of
inflation pressures in the outlook is contingent upon the successful
stabilisation of the exchange rate as a path to price stability.


Jul-18
Aug-18
Sep-18
Oct-18
Nov-18
Dec-18
Jan-19
Feb-19
Mar-19
Apr-19
May-19
Jun-19
Jul-19
Aug-19
Sep-19
Oct-19
Nov-19
Dec-19
M-O-M Inflation
Food
Non-Food

92. Monetary restraint, coupled with a stable exchange rate is set to anchor the
country’s disinflation programme through which monthly inflation is set to
gravitate towards single digit by December 2020. Figure 6 shows the
projected month-on-month disinflationary path.

Figure 6: Actual and projected Month-on-Month Inflation


Jan-19
Feb-19
Mar-19
Apr-19
May-19
Jun-19
Jul-19
Aug-19
Sep-19
Oct-19
Nov-19
Dec-19
Jan-20
Feb-20
Mar-20
Apr-20
May-20
Jun-20
Jul-20
Aug-20
Sep-20
Oct-20
Nov-20
Dec-20
Projections
Inflation

BANKING SECTOR DEVELOPMENTS

93. The banking sector plays a significant role in the economic and
developmental trajectory of the Zimbabwean economy. The Bank continues
to strengthen its tools for promoting financial sector stability as well as
complementing Fiscal Policy reforms. The architecture of the banking sector
is shown in Table 7:

Table 7: Architecture of the Banking Sector
Type of Institution
Number
Commercial Banks

Building Societies

Savings Bank

Total Banking Institutions

Other Institutions under the Supervision of the Reserve Bank
Development Financial Institutions

Deposit-taking Microfinance Institutions

Credit-only Microfinance Institutions

Total

Performance of the Banking Sector

94. The banking sector performed satisfactorily during the year ended 31
December 2019, as reflected by improved capital levels and earnings
performance, as well as satisfactory asset quality and liquidity.

95. A combination of foreign currency and investment property revaluation gains
buoyed overall sector profitability during the year ended 31 December 2019.
The financial soundness indicators for the period under review are provided
in the Table 8.


Table 8: Financial Soundness Indicators
Key Indicators
Benchmark
Dec-18
Jun-19
Sep-19
Dec-19
Total Assets ($ bn)

Total Loans &
Advances ($ bn)

Net Capital Base ($ bn)

Total Deposits ($ bn)

Net Profit ($ bn)

Return on Assets (%)

Return on Equity (%)

Capital Adequacy Ratio

Tier 1 Ratio (%)

Loans to Deposits (%)

Non-Performing Loans
Ratio (%)

Liquidity Ratio (%)


Capitalisation
96. The banking sector remained adequately capitalized with the average capital
adequacy and tier 1 ratios of 39.56% and 27.87% as at 31 December 2019,
respectively, above the regulatory minima of 12% and 8%, respectively. All
banking institutions complied with the minimum regulatory capital adequacy
and tier 1 ratios.

97. There was a growth in aggregate core capital of $7.47 billion as at 31
December 2019, representing a 220.60% increase from $2.33 billion as at 30
June 2019. The growth in capital was mainly attributed to capitalisation of
retained earnings.

98. As at 31 December 2019, all banking institutions were compliant with the
prescribed minimum capital requirements as shown in Table 9 below.

Table 9: Banking Sector Capitalisation ($ million)
Institution
Core Capital
as at 30 June
2019 ($m)
Core Capital as at
31 Dec 2019 ($m)
Prescribed Minimum
Capital requirements
($m)
Metbank
67.00
2,612.10

Ecobank
424.31
757.37

CBZ Bank & Society
268.08
712.57

Stanbic Bank
186.39
650.53

First Capital Bank
174.52
385.30

BancABC
73.96
348.49

FBC Bank
166.25
316.27

Nedbank Zimbabwe
80.68
312.68

NMB Bank
150.85
205.20

Agribank
73.55
201.67

ZB Bank & Society
106.00
189.58

Standard Chartered Bank
118.76
168.65

Steward Bank
82.84
130.19

BUILDING SOCIETIES


CABS Building Society
172.90
332.96

FBC Building Society
47.23
70.25

National Building Society
50.63
67.90

SAVINGS BANK


POSB
73.25
109.28
-
Total
2,328,.56
7,470.98
-


Banking Sector Deposits

99. Total banking sector deposits amounted to $34.50 billion as at 31 December
2019, an increase of 103.66% from $16.92 billion as at 30 June 2019. Figure
7 shows the trend of banking sector deposits over the period 31 December
2014 to 31 December 2019.

Figure 7: Trend of Banking Sector Deposits ($ million)


100. The increase in the deposit base during the period under review is attributable
to rise in demand and foreign currency denominated deposits. The deposit
base for the banking sector is dominated by demand and FCA deposits which
accounted for 59.15% and 31.82% of the total non-bank deposits,
respectively, as shown in the Figure 8.


31-Dec-14
31-Dec-15
31-Dec-16
31-Dec-17
30-Dec-18
31-Mar-19
30-Jun-19
30-Sep-19
31-Dec-19

Figure 8: Composition of Deposits as at 31 December 2019


Loans and Advances

101. Total banking sector loans and advances increased by 104.70%, from $6.17
billion as at 30 June 2019 to $12.63 billion as at 31 December 2019. The total
banking sector loans and advances also include foreign currency denominated
loans, whose translation partly explains the growth in total loans during the
period under review.

102. The level of banking sector financial intermediation has, however, remained
subdued as reflected by the loans to deposits ratio of 36.60%, largely as a
result of cautious lending approach adopted by some banking institutions.
Figure 9 shows the trend in the total banking sector loans and advances.


Demand
Deposits
59.15%
Savings Deposits
3.28%
Time Deposits
4.75%
FCAs
31.82%
Negotiable
Certificates of
Deposits
1.00%

Figure 9: Banking Sector Loans & Advances (2014 to 2019 ($m)


103. Loans to productive sectors of the economy constituted 82.50% of total sector
loans as at 31 December 2019, as shown in Figure 10.

Figure 10: Sectoral Distribution of loans as at 31 December 2019


Dec-12
Dec-13
Dec-15
Dec-16
Dec-17
Dec-18
Jun-19
Sep-19
Dec-19
Consumptive
13.68%
Other
3.82%
Agriculture
28.89%
Manufacturing
11.65%
Commercial
5.83%
Mining
5.18%
Distribution
10.57%
Construction
0.95%
Transport
0.73%
Communication
0.12%
Financial
12.93%
Mortgage
5.65%
Productive
82.50%

Loan Portfolio Quality

104. The quality of the banking sector loan portfolio continued to improve,
reflected by the decline in the non-performing loans (NPLs) to total loans,
from 3.95% as at 30 June 2019 to 1.75% as at 31 December 2019.

105. The improvement in the NPLs ratio was mainly driven by an increase in total
banking sector loans and advances during the period under review, as well as
decline in total non-performing loans from $245.65 million as at 30 June 2019
to $221.62 million as at 31 December 2019.

106. Figure 8 shows the trend in the level of non-performing loans to total loans
ratio (NPLs ratio) from December 2014 to December 2019:

Figure 11: Non-Performing Loans to Total Loans Ratio Dec 2014 – Dec


Dec-14 Dec-15 Dec-16Mar-17 Jun-17 Sep-17 Dec-17Mar-18 Jun-18 Sep-18 Dec-18 Jun-19 Sep-19 Dec-19
Level of NPLs Ratio

Earnings Performance
107. During the period under review, all banking institutions were profitable, with
aggregate profit of $6.41 billion for year ended 31 December 2019, up from
$389.85 million for the period ended 31 December 2018.

108. The growth in net income was largely attributed to revaluation of foreign
currency denominated assets and investment properties. Consequently, other
non-interest income was the key revenue driver in the sector during the period
under review, followed by interest income from investments and securities,
as shown in Figure 12.

Figure 12: Income mix as at 31 December 2019


Banking Sector Liquidity
109. The average prudential liquidity ratio as at 31 December 2019 was 72.42%
compared to 64.77% as at 30 June 2019. One (1) banking institution was noncompliant with the minimum prudential liquidity ratio of 30%. The nonInterest Income
from Loans
Advances and
Leases
11.52%
Interest
Income on
Balances with
Banking
Institutions
15.76%
Interest Income
on Investments &
Securities
22.42%
Foreign
Exchange
8.48%
Fees and
Commission
4.85%
Other Non
Interest Income
36.97%

compliant banking institution is taking measures to ensure compliance with
the minimum prudential liquidity ratio.

110. Figure 13 shows the trend in the banking sector average prudential liquidity
ratio from March 2015 to December 2019.

Figure 13: Prudential Liquidity Ratio Trend (%)


111. The prudential liquidity ratio has remained high reflective of the cautious
approach to lending by most banking institutions.

Enhancement of the Legal Framework

112. The regulatory framework for supervision of banks is currently under review
to enhance consolidated supervision, cross border co-operation and crisis
management. Accordingly, proposals for the amendments to the Banking Act

Mar-15
Mar-16
Mar-17
Mar-18
Dec-18
Mar-19
Jun-19
sep-19
Dec-19
industry average
minimum requirement

[Chapter 24:20] and the Reserve Bank of Zimbabwe Act [Chapter 22:15]
will be made to align with developments in the sector as well as best practice.

113. Amendments to the Deposit Protection Corporation Act [Chapter 24:29] are
also being considered to incorporate the liquidation framework for banking
institutions.

114. The winding up framework of the Companies & Other Business Entities Act
[Chapter 24:31], which repealed the Companies Act [Chapter 23:03]
gazetted on 15 November 2019, will not be applicable to banking institutions.

Microfinance Amendment Act (2019)

115. The Microfinance Amendment Act [Chapter 24:30] Amendment No.6 of
2019 was enacted in November 2019. Key provisions of the Act include
refinement of classes of institutions eligible for licensing, strengthening of
supervision and oversight, amendment of the tenure of licence, establishment
of a Microfinance Advisory Council, among other provisions.

116. The Act now recognises only two classes of microfinance institutions, that is,
the credit-only microfinance institutions and deposit-taking microfinance
institutions. The period of registration for all microfinance institutions is now
perpetual, subject to cancellation in terms of the provisions of the Act. There
is no longer a requirement for renewal of licences.

117. Every person who was registered as a moneylender or corporate
microfinancier before the Microfinance Amendment Act may continue to

operate until the expiry of the registration certificate, whereupon an
application for a perpetual licence may be made in terms of the Act.

118. All microfinance institutions whose licences have expired are required to
apply under the new requirements. Once an application is made, such
microfinance institutions may continue operating pending the granting or the
refusal of the application.

119. The Microfinance Amendment Act has enhanced corporate governance
requirements for microfinance institutions, including spelling out statutory
duties of directors and principal officer of a microfinance institution as
follows:
a. Duty to act bona fide i.e. in good faith;
b. Duty to avoid conflict of interest;
c. Duty to possess and maintain knowledge and skill reasonably
expected for a person holding a similar appointment; and
d. Duty to exercise due care in carrying out his or her functions.

120. All microfinance institutions are required to ensure that they have put in place
sound corporate governance and risk management structures in order to
ensure compliance with the Act. The Microfinance Amendment Act restricts
shareholding in a microfinance institution by any person to not more than
25%.

121. Microfinance institutions are, therefore, required to regularise their
shareholding structures in line with the provisions of the Act. Any application
for a microfinance licence will be considered on the basis of the Microfinance
Act, as amended.

Policy Framework for Domestic Systemically Important Banks
122. The failure of large banking institutions that are either highly interconnected,
with less substitutable products or high complexity, can lead to the paralysis
of the economy. Local banking institutions whose distress might lead to
market wide disruption in the provision of financial services are known as
domestic systemically important banks (D-SIBs).

123. Cognisant of this and in line with international best practice, the Bank has
adopted a set of principles that constitute the D-SIB framework. The
objectives of this policy framework focus on putting in place relevant
regulatory measures for the identification, monitoring and management of
local systemically important institutions.

124. The policy framework presents the following:

i.
the assessment methodology for the identification of D-SIBs;
ii.
the additional prudential measures covering additional capital
requirements;
iii.
frequency of monitoring; and
iv.
other supervisory requirements.

125. Banking institutions designated as D-SIBs shall be required to, inter-alia,
maintain additional capital buffers that should be met with Tier 1 capital.
The aim of the additional capital requirements is to ensure that the D-SIBs
have a higher share of their balance sheet funded by instruments that reinforce
the resilience of the institution as a going concern. The D-SIB policy
framework will be issued to the market by 31 March 2020.

Macro-prudential Policy Framework
126. As part of ongoing financial stability assessments, the Bank is in the process
of operationalising the Macro-Prudential Policy Framework, which facilitates
identification of vulnerabilities in the financial system, as well as ability to
withstand aggregate shocks, taking into account macro-financial linkages.

Financial Inclusion
127. Implementation of the National Financial Inclusion Strategy (NFIS) through
various initiatives targeting previously marginalised segments is now in its
5th year.

128. Following the launch of the NFIS in March 2016, the Bank has continued to
scale up collaborations with other key stakeholders such as government
ministries, tertiary institutions, development partners, financial service
providers, industry and umbrella bodies.

129. A review of the NFIS journey travelled so far, reveals that significant
progress has been recorded in the areas of financial product diversification,
innovation and human centred design of financial services and delivery
channels; digital finance, financial literacy, consumer protection, opening of
low cost bank accounts, access to financial products and services by various
target segments, access to micro-insurance products as well as increased
participation of lower income groups on the capital markets.

130. The Bank is now collaborating with stakeholders in reviewing the first phase
of the implementation of the NFIS as well as crafting the NFIS Phase II.

131. Banks, MFIs, Non-banking financial institutions & MNOs, continue to
explore innovative ways of delivering financial services to the marginalised
segments through leveraging on technology.

132. Innovations such as mobile banking, digital finance, psychometric credit
scoring models, biometric technology, value chain financing, group lending,
micro insurance, micro business and housing loans, etc are increasing access
to, usage and quality of finance for low-income clients.

Level of Access to Financial Services
133. A remarkable improvement in the level of access to financial services has
been noted as reflected in the financial inclusion indicators in the Table 10.

Table 10: Financial Inclusion Indicators – December 2016 to Dec 2019
Indicator
Dec-16
Dec-17
Dec-18
Jun-19
Sep-19
Value of loans to SMEs ($ m)

% of loans to SMEs over total loans

Number of SMEs with bank accounts

Number of Women with Bank Accounts

Value of Loans to Women ($ m)

Number of Loans to Youth

Value of Loans to Youth ($ m)

Total
number
of
Bank
Accounts
(millions)

Number of Low Cost Accounts (millions)


134. The total number of bank accounts has continued to increase on the back of
an increase in low cost accounts, as banks heed calls by the Bank to open low
cost accounts with light KYC requirements.

135. Access to finance by target segments such as women, youth and MSMEs has
continued to increase, largely as a result of a number of financial inclusion
initiatives by the Bank. The growth in the number of accounts opened by
women from less than 1 million in 2016 to over 2 million in 2019 is attributed
to increased focus on women friendly focused financial services and products
by banking institutions.

136. Following deliberate efforts by both the government and the private sector,
Zimbabwe has fully embraced digital financial services resulting in over 90%
of the transactions now being electronic.

137. Electronic transaction volumes increased from two million in 2009 to over
two billion in 2019, (1,000 times in 10 years) while value of electronic
transactions also increased from $7 billion in 2009 to $430 billion in 2019,
(an increase of 60 times in 10 years).

138. As Monetary Authorities we urge members of the public to continue to make
use of formal banking channels to transact, as these are secure.

Outreach Programmes
139. The Bank continues to participate as well as collaborating with stakeholders
in various outreach programs aimed at raising awareness to members of the
public about available financial products and services as well as financial
inclusion initiatives.

Sources of data for credit worthiness assessment

140. The Bank continues to urge credit providers to make use of alternative data
to provide financial services to MSMEs. Credit reporting service providers
and lending institutions can leverage on the vast amounts of digitized
alternative data including transactional (payments) data, behavioural data and
social media data to determine capacity and willingness to repay loans.

141. This data can also be used to provide granularity on customer preferences and
behaviours, which can help in designing new financial products and services.

142. Mindful of this development, the Bank is encouraging credit reporting service
providers to explore innovative ways of using alternative data to promote
access to credit particularly for those that are credit invisibles and operate in
the informal sector.

NATIONAL PAYMENT SYSTEMS
143. The Bank continued to ensure that the National Payment System (NPS) is
safe, secure, efficient and cost-effective on the back of a number of measures
instituted. These included oversight, supervision, research, licensing and
operational activities.

144. At the same time the Bank continued to place priority on stakeholder
engagement as a means to achieving strategic objectives in the national
payment systems arena.

145. As previously reported, a number of initiatives continue to be enforced and
undertaken to protect consumers and ensure compliance with international
security standards, such as EuroPay, MasterCard and Visa (EMV) and the
SWIFT Customer Security Programme.

146. The volumes and values for digital financial transactions trended upwards by
an average of 1 % and 13 % per month, respectively, during the period
January to December 2019 as shown in Figure 14.

Figure 14: Electronic Transactional Activities from January-December

147. The national payment streams are characterised by both large value (Real
Time Gross Settlement) and small value (mobile financial services, cheque,
automatic teller machines and point of sale).

148. Figure 15 shows the architecture of the payment, clearing and settlement
system with proportional representation of transactional activities in the
economy during the year 2019.


-


JAN
FEB
MAR
APR
MAY
JUNE
JULY
AUG
SEPT
OCT
NOV
DEC
Millions
Billions
Values
Volumes

Figure 15: Structure of Aggregate Payment Stream Values -2019


RESERVE BANK OF ZIMBABWE
FEBRUARY 2020
RTGS
0.561
CHEQUE
0.000
POS
0.067
ATMS
0.001
MOBILE
0.269
INTERNET
0.102
RTGS
CHEQUE
POS
ATMS
MOBILE
INTERNET