According to the Reserve Bank of Zimbabwe (RBZ) the purchase of foreign exchange from the formal system, the foreign exchange auction and other economic activities have resulted in an increase in reserve money by ZWL$1.037 billion, New Zimbabwe reports.
According to Investopedia:
A reserve currency is a large quantity of currency maintained by central banks and other major financial institutions to prepare for investments, transactions, and international debt obligations, or to influence their domestic exchange rate.
According to the publication, an update by the central bank reportedly said:
Reserve money increased by ZW1 037 million over the week ending 4 September 2020, largely reflecting an increase of ZW$969 million in banks’ deposits at the RBZ. In total, reserve money rose from ZWL$12.1 billion to ZWL$13.1 billion.
The increase in banks’ liquidity was attributable to the purchase of foreign exchange from the market by RBZ and government expenditures, all of which raised the deposit levels in the banking system. Foreign exchange purchases by RBZ are mainly for funding the auction
Currency issued by the RBZ almost increased by ZWL$29 million while banking sector deposits increased by ZWL$1 billion. Statutory required reserves rose to ZWL$1.2 billion while banks RTGS liquidity rose ZWL$8.5 billion to ZWL$9.5 million.
The publication speculated that an increase in reserve money may contribute towards markets instability and exchange rate hikes.
The government recently banned Mobile Money cash-ins and cashouts and put transaction limits to some mobile money transactions in a bid to control black market’s influence on the skyrocketing exchange rate.
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