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+{"doc_id": "115954c17ad539681bbe7ffd9558ca5f", "text": "R\nE\nS\nE\nR\nV\nE\nB\nA\nN\nK\nO\nF\nZ\nI\nM\nB\nA\nB\nW\nE\nSustaining Price Stability And Economic Resilience\nBy\nJOHN PANONETSA MANGUDYA\nGOVERNOR\n2 FEBRUARY 2023\n2023 MONETARY POLICY STATEMENT \n2 \n \n \nTABLE OF CONTENTS \nLIST OF TABLES ................................................................................................ 5 \nSECTION ONE ..................................................................................................... 6 \nINTRODUCTION ................................................................................................ 6 \nSECTION TWO .................................................................................................... 9 \nASSESSMENT OF PREVIOUS MONETARY POLICY ................................... 9 \nSECTION THREE .............................................................................................. 20 \nDOMESTIC ECONOMIC DEVELOPMENTS ................................................. 21 \nReal Sector Developments .................................................................................. 21 \nInflation Developments ....................................................................................... 22 \nMonetary Developments ..................................................................................... 22 \nSECTION FOUR: BANKING SECTOR AND NATIONAL PAYMENTS \nDEVELOPMENTS ............................................................................................. 35 \nCONDITION AND PERFORMANCE OF THE BANKING SECTOR ........... 35 \nNATIONAL PAYMENT SYSTEMS ................................................................ 56 \nSECTION FIVE .................................................................................................. 63 \nEXTERNAL SECTOR DEVELOPMENTS ...................................................... 63 \nGlobal and Regional Economic Developments .................................................. 63 \nBalance of Payments Developments ................................................................... 65 \nSECTION SIX .................................................................................................... 73 \nNEW MONETARY POLICY MEASURES ...................................................... 73 \nOUTLOOK AND FORWARD GUIDANCE ON INTEREST RATES ............ 81 \nInflation Outlook ................................................................................................. 81 \n3 \n \nForward Guidance on Interest Rates ................................................................... 82 \nSECTION EIGHT ............................................................................................... 84 \nCONCLUSION ................................................................................................... 84 \n \n4 \n \nTABLE OF FIGURES \nFigure 1: Inflation and Interest Rate Trends in 2022 .......................................... 10 \nFigure 2: Month-on-Month Growth in Credit to Private Sector (%) .................. 11 \nFigure 3: Components of Reserve Money (ZW$ Billion) .................................. 15 \nFigure 4: Exchange Rate Movements ................................................................. 16 \nFigure 5: Annual Foreign Currency Inflows Trend (US$ Millions) .................. 18 \nFigure 6: Annual Inflation (September 2021 to January 2022) .......................... 25 \nFigure 7: Month-on-Month Inflation % .............................................................. 26 \nFigure 8: Components of Reserve money as at the end December 2022 ........... 27 \nFigure 9: Monetary Developments (ZW$ Billion) ............................................. 28 \nFigure 10: Money Supply Growth and Inflation (%) ......................................... 29 \nFigure 11: ZSE All Share, Top 10 and Mining Indices ...................................... 31 \nFigure 12: ZSE Market Turnover (ZW$ Millions) ............................................. 32 \nFigure 13: Market Capitalisation (ZW$ billions) ............................................... 33 \nFigure 14: Victoria Falls Stock Exchange All Share Index ................................ 34 \nFigure 15: Assets Mix as at 31 December 2022 ................................................. 39 \nFigure 16: Sectoral distribution of loans as at 31 December 2022 ..................... 41 \nFigure 17: Trend in Non- Performing Loans ...................................................... 42 \nFigure 18: Banking Sector Income Mix as at 31 December 2022 ...................... 43 \nFigure 19: Banking sector performance .............................................................. 44 \nFigure 20: Prudential Liquidity Ratio Trend ...................................................... 45 \nFigure 21: Trend in Banking Sector Deposits .................................................... 46 \nFigure 22: Cumulative Loan Record per Institution ........................................... 51 \nFigure 23: Credit Registry Loan Records as at 31 December 2022 ................... 52 \nFigure 24: Credit Registry Usage Status ............................................................. 52 \nFigure 25: Percentage of Delinquent Loan Contracts by Gender ....................... 53 \nFigure 26: Digital Payment Systems Annual Values and Volumes for 2015 to \n2022 ..................................................................................................................... 57 \n5 \n \nFigure 27: RTGS Annual Values and Volumes 2015 to 2022 ........................... 58 \nFigure 28: Retail Payment Systems Interoperability for 2022 ........................... 60 \nFigure 29: Distribution of Applications to Regulatory Sandbox as of 31 \nDecember 2022 ................................................................................................... 62 \nFigure 30: International Commodity Price Indices Development and outlook: \n(Nominal US$ 2010=100) ................................................................................... 65 \nFigure 31: Current Account Developments (US$ millions) ............................... 66 \nFigure 32: Blended Inflation Outlook Under Alternative Scenarios of Month-\non-Month Inflations Outturns ............................................................................. 82 \nFigure 33:Implied Interest Rate Path January-December 2023 .......................... 83 \n \nLIST OF TABLES \nTable 1: Gold Coins Sales-as at 13 Jan 2023...................................................... 14 \nTable 2: Foreign Exchange Auctions Data as of 13 January 2023 ..................... 17 \nTable 3: Bureau de Change Sales – January to December 2022 ........................ 20 \nTable 4: Gold Deliveries (Kgs) to FGR - Jan 2021 to December 2022 ............. 22 \nTable 5: Proportions of Domestic Expenditure in Foreign Currency and Local \nCurrency .............................................................................................................. 24 \nTable 6: Banking Sector Architecture ................................................................ 35 \nTable 7: Financial Soundness Indicators ............................................................ 36 \nTable 8: Core Capital levels as at 31 December 2022. ....................................... 37 \nTable 9: DTMFI Sub-Sector Capitalization (Minimum Requirement US$5m) .. 55 \nTable 10 Global and Regional Economic Growth & Outlook (%) .................... 64 \nTable 11: Total Foreign Currency Receipts (US$ millions) ............................... 67 \nTable 12: Exports Earnings by Sector (US$ million) ......................................... 68 \nTable 13: Foreign Payments by Category in US$ Millions ................................ 69 \nTable 14: Diaspora Remittances by Source ........................................................ 71 \n6 \n \nSECTION ONE \nINTRODUCTION \n \n1. \nThis Monetary Policy Statement (MPS) is issued in terms of Section 46 of \nthe Reserve Bank of Zimbabwe Act [Chapter 22:15] and details evaluation \nof the current monetary policies of the Bank and outlines the new policy \nmeasures to be pursued by the Bank in the next 6 months with a view to \nachieving price and financial sector stability. \n \n2. \nThe MPS comes at a time when the global economy is projected to record a \nslowdown in economic growth as a result of tight monetary conditions as \ncentral banks fight inflation, declining investment, lagged effects of the \nCovid-19 pandemic and global supply chains disruptions and rising \ncommodity prices emanating from the Russia-Ukraine conflict. In its \nJanuary 2023 World Economic Outlook update, the International Monetary \nFund (IMF) projects that global Gross Domestic Product (GDP) growth in \n2023 will slow to 2.9 percent, compared to a 3.4 percent 2022. The adverse \nglobal developments are likely to have spill-over effects on the domestic \neconomy through trade, imported inflation and financial linkages. \n \n3. \nOn the domestic front, the current tight monetary policy stance has allowed \nthe Bank to anchor inflation and exchange rate expectations through \nmeasures designed to sustain price and exchange rate stability. The \nmonetary policy measures implemented in 2022 also provided some \nresilience in the economy against both domestic and global shocks and \nheadwinds. This has seen inflation trending down, especially in the last \nquarter of 2022 as business confidence, industry activity and exports \nimproved significantly. More importantly, foreign currency receipts reached \n7 \n \nan all-time high of US$11.6 billion in 2022 against total foreign currency \npayments of US$8.6 billion, thus, significantly contributing to foreign \ncurrency liquidity in the economy. \n \n4. \nThe gold coins introduced by the Bank in July 2022 also significantly \ncontributed to exchange rate and price stability. The coins have proved to be \nan effective open market instrument for mopping up excess liquidity in the \neconomy and a retail investment product for preserving value for investable \nfunds. The combination of tight monetary policy through high policy rates \nand the liquidity-mopping effects of the gold coins and the foreign exchange \nauction system played a pivotal role in achieving price and exchange rate \nstability in the economy. \n \n5. \nWhile the current high-interest rates have managed to stabilise prices and \nthe exchange rate by anchoring expectations and curbing speculative \ntransactions, they need to be aligned with the declining inflation path \nexperienced since the last quarter of 2022. In essence, the current high-\ninterest rates may present a risk of discouraging private sector borrowing in \nlocal currency and contracting economic growth in the medium to long term, \nespecially in the wake of the anticipated slowdown in global economic \nactivity. \n \n6. \nThese developments underscore the need to review monetary policy in sync \nwith inflation to balance macroeconomic stability and boost industrial \nactivity and economic growth. The Bank will thus stay the course of the \ncurrent monetary policy stance to consolidate and sustain the current \nstability, resilience and growth trajectory gains, while simultaneously \nstrengthening financial intermediation and curbing speculative borrowing. \n8 \n \n7. \nAgainst this background, this Policy Statement, outlines measures required \nto ensure that the monetary policy stance remains tight enough to sustain the \ncurrent stability, while preserving the country’s growth prospects and an \noptimal mix of the dual currency basket. The measures are specifically \naimed at ensuring that inflation and exchange rate pressures are firmly under \ncontrol, whilst economic activity remains robust. \n \n8. \nThe rest of the Statement is organised as follows: Section two evaluates the \nprevious monetary policy measures; Section three highlights the recent \neconomic developments; Section four provides an insight of financial sector \ndevelopments; Section five highlights the external sector developments; \nSection six details the new monetary policy measures; Section seven \noutlines the inflation outlook and provides forward guidance on interest rates \nand Section eight concludes the Monetary Policy Statement. \n \n \n9 \n \nSECTION TWO \nASSESSMENT OF PREVIOUS MONETARY POLICY MEASURES \n \n9. \nThe monetary policy measures implemented by the Bank since the issuance \nof the Mid-Term Monetary Policy Statement in July 2022 have proved to be \neffective. Inflationary pressures significantly dissipated leading to general \nstability in prices and the exchange rate. Notably, month-on-month inflation, \nwhich reached a peak of 30.7% in June 2022 decelerated to less than 2.5% \nby end of 2022. The upward trajectory of annual inflation in 2022 has since \nreversed since September 2022, although it remains high largely due to the \nbase year effect. The exchange rate has to a large extent stabilised, and the \nparallel market premium fell to less than 20% by the end of 2022. \n \nInterest Rate Policy \n10. The Bank has been maintaining a tight policy stance since July 2022 with \nthe Bank policy rate pegged at 200% to contain speculative borrowing. The \nreview was also done to ensure positive real rates in line with expected \ninflation as shown in Figure 1. \n \n \n \n \n \n \n \n \n \n10 \n \nFigure 1: Inflation and Interest Rate Trends in 2022 \n \n \n11. Figure 1 shows the interest rate trends versus the expected inflation trend \nthat was obtained in June 2022 when the decision to increase the interest \nrates was taken. By end of May 2022, expected inflation was above 200% \ncompared to the Bank policy rate of 80%, thus underlining the need for an \nimmediate review. \n \n12. The upward review in interest rates has resulted in a reduction in speculative \nborrowing, which saw the month-on-month growth in credit to the private \nsector declining from 33.28% in May 2022 to a negative 9% in October \n2022, before recovering to 9.96% in December 2022. \n \n0.00%\n50.00%\n100.00%\n150.00%\n200.00%\n250.00%\nJan-22\nFeb-22\nMar-22\nApr-22\nMay-22\nJun-22\nJul-22\nAug-22\nSep-22\nOct-22\nNov-22\nDec-22\nJan-23\nExpected Inflation\nImplied policy rate\nPolicy Rate\nNeed for \ndownward \ninterest \nrate \nreview\nNeed for \nupward \ninterest rate \nreview \n11 \n \nFigure 2: Month-on-Month Growth in Credit to Private Sector (%) \n \nSource: RBZ, 2023 \n \n13. The unintended consequence of high interest rates has been the shift by bona \nfide borrowers from Zimbabwean dollar-denominated loans to foreign \ncurrency loans, resulting in the banks’ loan book being dominated by foreign \ncurrency loans. The proportion of foreign currency-denominated loans \nincreased from about 37.0% in December 2021 to 64.2% in December 2022. \n \n14. In this context, the need to synchronise monetary policy with inflation is \ncritical to preserving stability and the country’s potential output growth. The \nsynchronization is also important to maintain the optimal mix of currencies \nin the dual currency basket and avoid arbitraging between the currencies in \nthe dual currency basket. \n \n \n \n-20\n-10\n0\n10\n20\n30\n40\n50\n60\n12 \n \nMedium-Term Bank Accommodation (MBA) Facility \n15. The productive sectors continued to benefit from the Medium-term Bank \nAccommodation (MBA) facility ensuring that economic growth remains \nrobust even under tight monetary conditions. As such, the MBA window \nremains necessary to continue stimulating the critical productive sectors of \nthe economy especially with fears of a global recession intensifying. \n \n16. In this regard, a cumulative amount of ZW$14 billion was disbursed while \nthe outstanding balance was ZW$8 billion as at 30 December 2022. The \ninterest rate of 100% set in June 2022 has become the rate upon which most \nproductive lending facilities by banks are benchmarked. \n \nMicro, Small and Medium Enterprises (MSMEs) Facility \n17. The intervention by the Bank to assist the MSME sector following \nchallenges that emanated from the Covid-19 pandemic managed to keep \nsome small businesses afloat. Cumulative disbursements under the facility \namounted to ZW$1.7 billion at the end of 2022. \n \nOpen Market Operations Instruments \n18. In pursuit of the tight monetary policy stance, daily excess balances of banks \nremained at ZW$100.0 million during the second half of the year 2022 with \nany excess liquidity mopped up through the issuance of Non-Negotiable \nCertificates of Deposit (NNCDs). \n \n19. The outstanding level of NNCDs as at 30 December 2022 stood at ZW$231 \nbillion. The increased levels of NNCDs partly reflect the low lending \n13 \n \nactivities of banks following the increase in interest rates which saw the \nBank policy rate raised to 200% in June 2022. \n \n20. To further manage liquidity injections arising from foreign exchange \nstructures, the Bank introduced RBZ Collateral Bills with tenor matching \nthe maturity of the structure. \n \nMosi-oa-Tunya Gold Coins \n21. The Bank introduced gold coins in July 2022 as both an alternative retail \ninvestment product for value preservation in the dual currency system and a \nliquidity mopping instrument over and above the foreign exchange auction \nsystem. The gold coins have been well received with 25 188 coins valued at \nZW$20 billion having been sold as at 13 January 2023. The bulk of gold \ncoins, 84% were bought by corporates while purchases by individuals \naccounted for 16%. \n \n22. The gold coins have a vesting period of 180 days after which the Bank can \nbuy them back from the investors. Table 3 shows the gold coins sales as at \n13 January 2023. \n \n \n14 \n \n Table 1: Gold Coins Sales-as at 13 Jan 2023 \nDetails \nCumulative Sales \nOne Oz Gold Coin \n15,526 \n½ Oz Gold Coins \n2553 \n¼ Oz Gold Coin \n2782 \n1/10 Oz Gold Coin \n4327 \nTotal \n25,188 \n23. To cater for those with lower savings, the Bank introduced smaller \ndenominations in November 2022. As at 13 January 2023, the smaller \ndenominations accounted for 38% of all sales. The Bank will continue to \navail gold coins on a demand driven basis as it seeks to promote a savings \nculture and provide alternative investment instruments to the public in the \ndual currency system. \n \nStatutory Reserves \n24. The levying of statutory reserves on foreign currency-denominated deposits, \nwhich came into effect on 1 September 2022, saw a significant build-up in \nreserve money. Since then, the foreign currency component of statutory \nreserves has continued to escalate due to the impact of exchange rate \ndepreciation. As at 30 December 2022, foreign currency statutory reserve \nbalances stood at US$70 million, ZAR 45 million, BWP 0.3 million and \nEuro 0.2 million. \n \n25. The increase in statutory reserves, which now constitute more than 90% of \nreserve money, signifies further tightening of monetary policy to the extent \nthat the reserves are locked up at the Bank and are not available for on-\nlending by banking institutions. Figure 3 shows the composition of statutory \nreserves. \n15 \n \n Figure 3: Components of Reserve Money (ZW$ Billion) \n \n \nLiberalisation of the Foreign Exchange Market \n \n \n26. The further liberalization of the foreign exchange market through the \nintroduction of the willing-buyer willing-seller (WBWS) interbank market \nfor foreign exchange has gone a long way to assist in price discovery of the \nequilibrium exchange rate and to augment the foreign exchange auction \nsystem. \n \n27. The liberalisation of the foreign exchange market saw the parallel market \nexchange rate premium declining to less than 20%, thus enhancing the scope \nfor convergence of the official and the parallel market exchange rate as \nshown in Figure 4. \n0\n20\n40\n60\n80\n100\n120\nJun 22\nJul-22\nAug-22\nSep-22\nOct-22\nNov-22\nDec-22\nRequred Reserves FCA\nRequired Reserves ZWL\nCurrency Issued\nRTGS Balances\n16 \n \n Figure 4: Exchange Rate Movements \n \nSource: RBZ, 2023 \n \nForeign Exchange Auction System \n28. The foreign exchange auction system remained a key source of foreign \ncurrency for the economy, fostering stability in both the foreign exchange \nand goods markets. The foreign exchange market was generally stable \nduring the second half of 2022, as reflected by stability in the goods market. \n \n29. In 2022, a total amount of US$1.1 billion was allotted on the foreign \nexchange auction, representing 91% of the total bids submitted. Since the \nintroduction of the auction system, cumulative allotments amounted to \nUS$3.7 billion as at 31 December 2022. The share of the MSMEs sector \ncontinued to increase from 17% during the first half of 2022 to 22% in the \nsecond half of 2022. \n \n30. The tightening of monetary policy and the introduction of the WBWS have \nseen the number of bids received on the auction declining from an average \nof 1,450 to around 250 during the second half of 2022. Similarly, the value \n0%\n50%\n100%\n150%\n200%\n250%\n300%\n350%\n0\n100\n200\n300\n400\n500\n600\n700\n800\n900\n1000\n31-Aug-21\n19-Sep-21\n8-Oct-21\n27-Oct-21\n15-Nov-21\n4-Dec-21\n23-Dec-21\n11-Jan-22\n30-Jan-22\n18-Feb-22\n9-Mar-22\n28-Mar-22\n16-Apr-22\n5-May-22\n24-May-22\n12-Jun-22\n1-Jul-22\n20-Jul-22\n8-Aug-22\n27-Aug-22\n15-Sep-22\n4-Oct-22\n23-Oct-22\n11-Nov-22\n30-Nov-22\n19-Dec-22\nPREMIUM (%)\nAUCTION RATE\nPARALLEL RATE\n17 \n \nof bids declined from weekly averages of around US$35 million during the \nfirst quarter of 2022 to US$12 million in the last quarter. Table 1 shows the \ndetails of the auction allocations as at 13 January 2023. \n \nTable 2: Foreign Exchange Auctions Data as of 13 January 2023 \nDate \nFX market \nWeek \nThe \nhighest \nHighest \nbid \n(HB) \nWeighted \nAuction \nRate \n(AR) \nUS$ Total Bids \nUS$ Allotted \n2020-21 Total \n \n \n \n \n2,676,943,485.46 \n2,596,380,812.95 \nJan-Mar 2022 \n \n \n \n \n420,796,325.51 \n402,475,532.75 \nApril-June 2022 \n \n \n \n \n404,340,175.17 \n338,225,073.84 \nJuly-Sept 2022 \n \n \n \n \n254,226,897.02 \n239,249,287.62 \nOct-Dec 2022 \n \n \n \n \n141,509,782.29 \n134,204,276.30 \n2022 Total \n \n \n \n \n1,220,873,179.99 \n1,114,154,170.51 \n10-Jan-23 \nFX125/2023 \n670.0000 \n740.0000 \n705.4164 \n13,392,117.05 \n10,269,285.89 \n10-Jan-23 \nSMEFX119/2023 \n670.0000 \n740.0000 \n705.4164 \n1,001,434.07 \n786,897.36 \n2023 TOTAL \n \n \n \n \n14,393,551.12 \n11,056,183.25 \nGRAND TOTAL \n3,912,210,216.57 \n3,721,591,166.71 \n \nClearance of Foreign Exchange Auction Backlog \n31. To enhance confidence in the foreign exchange market and meet the \nrequirements of users of foreign exchange, the Bank cleared all allotment \nbacklogs and is now current with allotments. Going forward, the Bank will \nensure that allotted funds are settled within 14 days from the date of the \nauction as per the Foreign Exchange Auction Rules. \n \n \n \n18 \n \nForeign Exchange Inflows \n32. The measures being implemented by the Bank have also created a conducive \nenvironment for foreign currency generation in the economy as reflected by \na continued upward trajectory in foreign currency receipts. Total foreign \ncurrency receipts for the period January to 31 December 2022 amounted to \nUS$11.6 billion million compared to US$9.9 billion received during the \nsame period in 2021, representing a 17.3% increase. This speaks to the \nstrong and encouraging growth in the level of receipts during the year, which \nunder normal circumstances should be supportive of stability of the \nexchange rate. Figure 5 shows the sustained increase in foreign currency \nreceipts since 2019.\n\nFigure 5: Annual Foreign Currency Inflows Trend (US$ Millions) \n \nSource: RBZ, 2022 \n \n \n \n6,181\n7,481\n7,648\n6,497\n6,305\n5,377\n5,565\n6,467\n5,475\n6,288\n9,686\n11,566\n0\n2,000\n4,000\n6,000\n8,000\n10,000\n12,000\n14,000\n2011\n2012\n2013\n2014\n2015\n2016\n2017\n2018\n2019\n2020\n2021\n2022\nTotal Foreign Currency\n19 \n \nForeign Exchange Mobilisation \n33. The Bank mobilized US$800 million (including Letters of Credit (LCs) from \nlocal, regional and international partners to support the foreign exchange \nauction system as well as to meet the country’s balance of payments \nrequirements in 2022. \n \n34. The issuances of LCs under the African Export-Import Bank (Afreximbank) \nUS$150 Million Facility, as well as banks’ own facilities continued to \nsupport the balance of payments position of the country as they provided \ncritical foreign currency liquidity in the economy. LCs worth about US$198 \nmillion were issued under both the Afreximbank Facility and banks’ own \nfacilities. \n \n35. The revolving Afreximbank LC Facility was revised to a limit of US$50 \nmillion in December 2022. The Bank is working with Afreximbank to \noperationalise the revised facility and ensure that participating banks start \nissuances of the LCs in support of production, manufacture or acquisition of \nraw materials, equipment, fertilisers and agrochemicals during the first \nquarter of 2023. \n\nPerformance of Bureaux de Change \n36. Bureaux de Change continue to play a critical role in ensuring that foreign \nexchange for small transactions is readily availability. As from January to \nDecember 2022, a cumulative total of US$40 million was purchased through \nbureaux de change and foreign currency sales for various payments \namounting to US$29.8 million. Table 2 shows the breakdown of bureau de \nchange sales in 2022. \n \n20 \n \nTable 3: Bureau de Change Sales – January to December 2022 \nDESCRIPTION \nAMOUNT (US$) \n% CONTRIBUTION \nDOMESTIC UTILIZATION \n17,922,709 \n60% \nPERSONAL TRAVEL ALLOWANCE \n7,509,782 \n25% \nINVENTORY \n1,875,760 \n6% \nEDUCATION \n673,202 \n2% \nSUBSCRIPTIONS \n479,389 \n2% \nBUSINESS TRAVEL ALLOWANCE \n458,589 \n2% \nCHILD UPKEEP AND MAINTENANCE \n232,143 \n1% \nLIQUIDATION \n187,581 \n1% \nSPARES AND MACHINERY \n133,413 \n0% \nAIRFARES \n115,956 \n0% \nMEDICAL \n83,390 \n0% \nRBZ SALE \n73,544 \n0% \nRAW MATERIALS \n52,110 \n0% \nSOFTWARE FEES \n11,240 \n0% \nLICENCE FEES \n3,270 \n0% \nPROFESSIONAL/ TECHNICAL \n1,750 \n0% \nCROSSBORDER \n500 \n0% \nCONFERENCE FEES \n400 \n0% \nPENSION \n40 \n0% \nTOTAL \n29,814,768 \n100% \nSource: RBZ, 2022 \n\n \nCentral Bank Digital Currency (CBDC) Project \n37. The Bank’s CBDC Project continued to progress steadily in line with the \nenvisaged CBDC Road Map. In this regard, in November 2022, the Bank \nrolled out a consumer survey that intends to solicit opinions on the design \nand nature of the CBDC and its overall acceptance/acceptability by \nstakeholders. \n \n38. The survey is still open and the public is encouraged to submit responses \nonline to provide critical inputs to the CBDC Road Map. As at 23 January \n2023, the Consumer Survey had received 2286 responses since its launch on \n10 November 2022. The Bank is encouraged by the positive responses \nreceived so far which will be critical in informing the CBDC adoption. \n21 \n \nSECTION THREE \nDOMESTIC ECONOMIC DEVELOPMENTS \n \nReal Sector Developments \n39. The economy is estimated to have grown by 4.0% in 2022 underpinned by \nremarkable growth in the mining and quarrying sectors, wholesale and retail \ntrade, accommodation and food service industry, electricity production and \nconstruction services, among others. The positive performance of these \nsectors more than offset the drought-induced output decline sustained by the \nagriculture sector in 2022. \n \n40. Economic growth is forecast at 3.8% in 2023, largely premised on the \nanticipated increase in mining output supported by the favourable \ninternational commodity prices. The recovery of the agriculture sector, \nfollowing the drought-induced fall in outturn thus far, is also expected to \ncontribute significantly to growth in 2023. Further, the prevailing stable \neconomic conditions are expected to enhance activity in the manufacturing, \nwholesale, and retail trade sectors. \n \n41. Downside risks to the projected growth for 2023 emanate from the low and \nerratic supply of electricity experienced since December 2022. The Russia-\nUkraine conflict also continues to pose downside risks to economic activity \non account of its impact on food and energy prices. The current efforts to \nstabilise and increase the availability of electricity through the addition of \n600MW from Hwange Power Station are expected to ease the power supply \nchallenge. Furthermore, the expected water inflows into Lake Kariba will \nalso result in the resumption of normal operations at the Kariba South Power \nPlant. \n22 \n \nGold Deliveries \n42. Gold deliveries to Fidelity Gold Refinery (Private) Limited (FGR) increased \nby 19.1% to 35,280.07 kgs for the period extending from 1 January to 30 \nDecember 2022, from 29,629.62 kgs delivered during the same period in \n2021. The annual contribution by primary and small-scale gold producers \nincreased by 0.3% and 30.4%, respectively, during the period extending \nfrom January to December 2022. The Gold Incentive Scheme put in place \nby Government in 2021 has had a significant effect on the deliveries of gold \nto FGR by the small-scale gold producers. Table 4 shows the gold deliveries \nas at the end of December 2022. \n \nTable 4: Gold Deliveries (Kgs) to FGR - Jan 2021 to December 2022 \n \n \n2021 \n \n \n2022 \n \n% Change \nMonth \nPrimary \nSmall \nScale \nTotal \nPrimary \nSmall \nScale \nTotal \nPrimary \nSmall \nScale \nTotal \nJan \n642.11 \n355.52 \n997.63 \n814.28 \n2,053.66 \n2,867.94 \n26.80% \n477.60% \n187.50% \nFeb \n609.84 \n560.83 \n1,170.67 \n930.98 \n1,331.05 \n2,262.03 \n52.70% \n137.30% \n93.20% \nMar \n1,139.42 \n670.07 \n1,809.49 \n1,000.91 \n1,563.83 \n2,564.74 \n-12.20% \n133.40% \n41.70% \nApril \n752.32 \n632.26 \n1,384.58 \n859.44 \n1,621.97 \n2,481.41 \n14.20% \n156.50% \n79.20% \nMay \n884.2 \n783.81 \n1,668.01 \n1,055.68 \n1,935.57 \n2,991.25 \n19.40% \n146.90% \n79.30% \nJune \n1,125.60 \n1,798.70 \n2,924.30 \n837.12 \n1,968.02 \n2,805.14 \n-25.60% \n9.40% \n-4.10% \nJuly \n874.31 \n1,950.31 \n2,824.62 \n965.79 \n1,998.13 \n2,963.92 \n10.50% \n2.50% \n4.90% \nAug \n1,034.54 \n1,913.49 \n2,948.03 \n1,086.53 \n2,263.25 \n3,349.78 \n5.00% \n18.30% \n13.60% \nSept \n1,004.51 \n2,167.36 \n3,171.87 \n988.35 \n2,387.71 \n3,376.06 \n-1.60% \n10.20% \n6.40% \nOct \n1,005.12 \n2,046.79 \n3,051.91 \n933.95 \n2,860.22 \n3,794.17 \n-7.10% \n39.70% \n24.30% \nNov \n1,075.20 \n2,261.30 \n3,336.50 \n888.65 \n2,959.69 \n3,848.34 \n-17.40% \n30.90% \n15.30% \nDec \n1,011.83 \n3,330.18 \n4,342.01 \n827.87 \n1,147.42 \n1,975.29 \n-18.20% \n-65.50% \n-54.50% \nTotal \n11,159.00 \n18,470.62 \n29,629.62 \n11,189.55 \n24,090.52 \n35,280.07 \n0.30% \n30.40% \n19.10% \nSource: Fidelity Gold Refinery (Private) Limited \n \n \nInflation Developments \n43. In line with the Banks’ forecasts, both annual headline and month-on-month \ninflation continued to slow down and closed the year at 243.80% and 2.4%, \n23 \n \nrespectively. The Bank had in its monetary policy statement of July 2022, \nprojected annual inflation to end the year at around 250% and month-on-\nmonth inflation at 3%. The disinflationary trend continued in 2023 with \nmonth-on-month inflation declining from a peak of 30.7% in June 2022 to \n2.4% in December 2022, and 1.1% in January 2023. Annual inflation also \ndeclined to 229.8% in January 2023. \n \n44. It is, however, important to note that the ZW$ inflation is no longer a true \nrepresentative of the cost of living in Zimbabwe as the country is in a dual \ncurrency system where prices and household incomes are also in both USD \nand local currency. In this context, Zimbabwe’s inflation needs to be \nrecalibrated to reflect the dual currency nature of incomes and prices in the \neconomy to provide a true reflection of the cost of living in the country. \n \n45. As at end December 2022, the FCA deposits in the banking system \naccounted for 64.2% of total deposits, with the remainder being ZW$ \ndeposits. Transactional activities in the retail and wholesale sectors also \npoints to the same structure of currency composition as shown by recent \nConfederation of Zimbabwe Industry (CZI) surveys, which reported that on \naverage USD sales contribute 66% to foreign currency generation for the \nbusinesses. The dual currency structure of the economy is corroborated by \nestimates by the Zimbabwe National Statistics Agency (ZimStat) at \nClassification of Individual Consumption by Purpose (COICOP) division \nlevel as shown in Table 5. \n \n \n \n24 \n \nTable 5: Proportions of Domestic Expenditure in Foreign Currency and Local Currency \n(%) by Consumer Price Index (CPI) Division \nCOICOP DIVISIONS \nCOICOP \nWeights \n% of Expenditure in \nTotal \nUSS$ \nZW$ \nFood and Non-Alcoholic Beverages \n31.30 \n65.04 \n34.96 \n100.00 \nAlcoholic Beverages and Tobacco \n4.90 \n87.46 \n12.54 \n100.00 \nClothing and Footwear \n4.35 \n97.77 \n2.23 \n100.00 \nHousing, Water, Electricity, Gas and Other \nFuels \n27.62 \n76.45 \n23.55 \n100.00 \nFurniture and Equipment \n5.29 \n99.91 \n0.09 \n100.00 \nHealth \n1.42 \n91.08 \n8.92 \n100.00 \nTransport \n8.39 \n92.51 \n7.49 \n100.00 \nCommunication \n2.65 \n72.98 \n27.02 \n100.00 \nRecreation and Culture \n2.27 \n90.78 \n9.22 \n100.00 \nEducation \n4.25 \n95.38 \n4.62 \n100.00 \nRestaurants and Hotels \n1.08 \n95.57 \n4.43 \n100.00 \nMiscellaneous Goods and Services \n6.46 \n90.83 \n9.17 \n100.00 \n Total \n100.00 \n76.56 \n23.44 \n100.00 \nSource: ZimStat, 2023 \n \n46. As such, an inflation profile that combines US dollar and Zimbabwe dollar \nprice dynamics, which is currently being computed by ZimStat as a blended \ninflation needs to be considered and recalibrated to reflect the current \nproportions of expenditure and incomes obtaining in the economy and \nadopted as the official inflation for Zimbabwe. \n \n47. In line with the stability in general prices in the economy, the blended \ninflation profile, annual inflation remained relatively stable at 105.5% in \nDecember 2022 from 106.3% in August 2022. Heightened global food \nprices saw domestic annual food inflation elevated at an average of 132% \n25 \n \ncompared to non-food inflation average of 51.2% in 2022, as shown in \nFigure 6. \n \nFigure 6: Annual Inflation (%) (September 2021 to January 2023) \n \nSource: ZimStat, 2023 \n \n48. Reflecting obtaining stability in the prices, annual inflation in January 2023 \nstood at 101.5% from 105.5% in December 2023. Monthly inflation \ndeclined from a peak of 18% in June 2022 to close the year at 1.3% in \nDecember 2022 and was much lower at 0.7% in January 2023, as shown in \nFigure 7. \n \n \n \n \n \n \n \n \n0%\n20%\n40%\n60%\n80%\n100%\n120%\n140%\n160%\n180%\n200%\nAll Items\nFood and non alcoholic beverages\nNon food\n26 \n \n Figure 7: Month-on-Month Inflation (%) \n \nSource: ZimStat, 2023 \n \n49. The inflation developments largely reflect movements in the exchange rate \nas prices in USD have been relatively stable and, in some instances, \ndeclining. This points to the need to sustain exchange rate stability to anchor \ninflation expectations and stabilize prices under the dual currency \nenvironment. \n \nMonetary Developments1 \n50. Reserve money stock stood at ZW$104.04 billion as at 31 December 2022, \ncompared to ZW$33.55 billion recorded as of 30 June 2022. The increase \nwas largely due to the levying of statutory reserves on foreign currency \naccounts (FCA) deposits, which began on the 1 September 2022. The local \ncurrency equivalent of the statutory reserves has been increasing with \n \n1 Provisional monetary statistics pending finalization of the RBZ audit process. \n-5.0%\n0.0%\n5.0%\n10.0%\n15.0%\n20.0%\n25.0%\n30.0%\nFood and non alcoholic beverages\nNon food\nAll Items\n27 \n \nchanges in the exchange rate, thus explaining the significant build-up in \nreserve money, which was witnessed in the last quarter of 2022. \n \n51. As a result, statutory reserves, both in local and foreign currency, now \nconstitute over 90% of total reserve money, as shown in Figure 8. \n \n Figure 8: Components of Reserve money as at the end December 2022 \n \nSource: RBZ, 2022 \n \n52. The increase in statutory reserves, however, signifies the tightening of \nmonetary policy since these reserves are locked up at the Bank, and are not \navailable for on-lending by banks. \n \n53. Excess bank reserves (ZW$ balances at the Bank) declined from levels of \naround ZW$14 billion in 2021 to less than ZW$100 million (or 0.1% of \nreserve money) by end-December 2022, signifying further tightening of \nliquidity conditions in the economy. \n \nCurrency \nIssued\n7.28%\nFCA - Statutory \nReserves\n43.57%\nZW$ - Statutory \nReserves\n49.14%\nZW$ Balances\n0.01%\n28 \n \n54. Broad money (M3) amounted to ZW$2 338.26 billion as at end-December \n2022, compared to ZW$1 119.70 billion recorded in June 2022. The increase \nlargely reflected a rise of ZW$669.70 billion in foreign currency accounts \n(FCA) deposits, due to revaluation arising from exchange rate movement. \nThe inter-bank exchange rate moved from ZW$370.9646 per US$1 in June \n2022 to ZW$684.3339 per US$1 by end of December 2022, thus affecting \nthe local currency equivalent of the FCA deposits. The Zimbabwe dollar-\ndenominated deposits also rose by ZW$548.08 billion between June 2022 \nand December 2022, largely reflecting credit creation by banks. \n \n55. As a result, foreign currency deposits, at 56.88% of the total money supply \nas at December 2022, now dominate money supply, with local currency \ndeposits constituting 43.04% of money supply, while currency in circulation \naccounted for the remaining 0.18%. Figure 9 shows monetary developments \nfor the period December 2021 to December 2022. \n \n Figure 9: Monetary Developments (ZW$ Billion) \n \nSource: RBZ, 2022 \n \n0\n200\n400\n600\n800\n1000\n1200\n1400\n1600\n1800\n2000\n2200\n2400\n2600\nForeign Currency Deposits\nLocal Currency Deposits\nCurrency in Circulation\n29 \n \n56. Broad money grew by 391.88% on an annual basis, an increase from \n131.86% realised in December 2021. Largely reflecting the impact of \nexchange rate movements, foreign currency deposits increased by 530.07%, \nthereby contributing 234.96 percentage points to the 391.88% annual \nincrease in money supply. Local currency deposits also went up by 283.63% \non a year-on-year basis, contributing 156.53 percentage points to the annual \nincrease in broad money (M3). Figure 10 shows the relationship between \nbroad money and inflation. \n \nFigure 10: Money Supply Growth and Inflation (%) \n \nSource: RBZ, 2022 \n \n \n57. Underpinning the growth in M3 were increases of ZW$391.69 billion (or \n470.65%) and ZW$865.52 billion (or 388.25%) in net claims on \nGovernment and credit to the private sector, respectively. Of the ZW$391.69 \nbillion increase in net claims on Government, ZW$137.31 billion was due \n0\n100\n200\n300\n400\n500\n600\n700\n800\n900\nJan-19\nMar-19\nMay-19\nJul-19\nSep-19\nNov-19\nJan-20\nMar-20\nMay-20\nJul-20\nSep-20\nNov-20\nJan-21\nMar-21\nMay-21\nJul-21\nSep-21\nNov-21\nJan-22\nMar-22\nMay-22\nJul-22\nSep-22\nNov-22\nBroad Money Growth\nAnnual Inflation\n30 \n \nto the accounting treatment of the utilization of Special Drawing Rights \n(SDRs), which does not reflect actual lending to Government by the Bank. \n \n58. Credit to the private sector was mainly channelled to agriculture and \nhouseholds, which received 24.86% and 22.10% of the total credit, \nrespectively. The manufacturing and distribution sectors received 13.24% \nand 12.62%, respectively. \n \n59. Credit to the private sector was largely utilized for inventory build-up, \n32.72%; other recurrent expenditures, 31.62%; and fixed capital \ninvestments, 16.25%. \n \nStock Market Developments \n60. During the period June 2022 to December 2022, the Zimbabwe Stock \nExchange (ZSE) traded in negative territory. As such, the All Share, Top 10, \nTop15, Medium and Small Cap Indices declined largely due to low trading \nassociated with the festive season. The mining index, however, added \n27.30% to close the month of December 2022 at 25 487.77 points, compared \nto 20 021.24 points recorded in June 2022. \n \n61. On a year-on-year basis, the ZSE All Share, Top 10 and Mining Indices \nadded 80.13%, 80.74% and 226.12%, from 10 822.36 points, 6 811.43 \npoints and 7 815.37 points recorded in December 2021, respectively. Figure \n11 shows the developments of the ZSE All Share, Top 10 and Mining \nIndices for the period December 2021 to December 2022. \n \n31 \n \nFigure 11: ZSE All Share, Top 10 and Mining Indices \n \nSource: ZSE, 2022 \n \nMarket Turnover \n62. During the second half of 2022, trading activity was concentrated in some \nselected wealth-preserving counters. As such, turnover value increased by \n84.40% to ZW$81.56 billion, despite a 70.71% decline in the volume of \nshares traded, amounting to 1.28 billion shares. This compares to ZW$44.23 \nbillion and 4.37 billion shares recorded in the same period last year, as \nshown in Figure 12. \n \n4,800\n7,800\n10,800\n13,800\n16,800\n19,800\n22,800\n25,800\n28,800\n31,800\n2100\n5100\n8100\n11100\n14100\n17100\n20100\n23100\n26100\n29100\n32100\n31-Dec-21\n31-Jan-22\n28-Feb-22\n31-Mar-22\n30-Apr-22\n31-May-22\n30-Jun-22\n31-Jul-22\n31-Aug-22\n30-Sep-22\n31-Oct-22\n30-Nov-22\n31-Dec-22\nAll Share Index\nTop 10 Index\nMining Index\n32 \n \n Figure 12: ZSE Market Turnover (ZW$ Millions) \n \nSource: ZSE, 2022 \n \n63. The proportion of foreign purchases to the value of shares traded worsened \nto 10.98%, from 40.27% recorded during the comparable period in 2021. \n \nMarket Capitalization \n64. Owing to the negative trading exhibited on the local bourse, coupled with \nthe de-listing of some counters, the ZSE lost 16.17%, or ZW$394.30 billion \nworth of capitalization to ZW$2 044.87 billion in December 2022, from \nZW$2 439.17 billion in June 2022. \n \n65. On a year-on-year basis, the ZSE capitalization added 55.24%, from \nZW$1 317.21 billion recorded in December 2021. Figure 13 shows market \ncapitalization developments for the period December 2021 to December \n2022. \n \n0\n500\n1,000\n1,500\n2,000\n2,500\n3,000\n3,500\n4,000\n4,500\n5,000\n30-Dec-21\n30-Jan-22\n28-Feb-22\n31-Mar-22\n30-Apr-22\n31-May-22\n30-Jun-22\n31-Jul-22\n31-Aug-22\n30-Sep-22\n31-Oct-22\n30-Nov-22\n31-Dec-22\n33 \n \nFigure 13: Market Capitalisation (ZW$ billions) \n \n Source: ZSE, 2022 \n \nVictoria Falls Stock Exchange (VFEX) \n66. The Victoria Falls Stock Exchange (VFEX) exhibited bearish sentiments \nduring the period under analysis. Resultantly, the VFEX All Share Index \ndeclined by 17.82% to close the month of December 2022 at 94.83 points, \nfrom 115.39 points recorded in June 2022. On an annual basis, the VFEX \nAll Share Index lost 13.55%, from 109.69 points recorded in December \n2021, as shown in Figure 14. \n \n8.0\n458.0\n908.0\n1,358.0\n1,808.0\n2,258.0\n2,708.0\n3,158.0\n3,608.0\n31-Dec-21\n31-Jan-22\n28-Feb-22\n31-Mar-22\n30-Apr-22\n31-May-22\n30-Jun-22\n31-Jul-22\n31-Aug-22\n30-Sep-22\n31-Oct-22\n30-Nov-22\n31-Dec-22\n34 \n \n Figure 14: Victoria Falls Stock Exchange All Share Index \n \n \nSource: VFEX, 2022 \n \nMarket Capitalization \n67. The VFEX Market capitalization increased by 55.48% to US$0.42 billion in \nDecember 2022, from US$0.27 billion recorded in June 2022. \n \n 90.00\n 100.00\n 110.00\n 120.00\n 130.00\n 140.00\n 150.00\n26-Feb-22\n12-Mar-22\n26-Mar-22\n09-Apr-22\n23-Apr-22\n07-May-22\n21-May-22\n04-Jun-22\n18-Jun-22\n02-Jul-22\n16-Jul-22\n30-Jul-22\n13-Aug-22\n27-Aug-22\n10-Sep-22\n24-Sep-22\n08-Oct-22\n22-Oct-22\n05-Nov-22\n19-Nov-22\n03-Dec-22\n17-Dec-22\n31-Dec-22\n35 \n \nSECTION FOUR: BANKING SECTOR AND NATIONAL \nPAYMENTS DEVELOPMENTS \n \nCONDITION AND PERFORMANCE OF THE BANKING SECTOR \n68. The banking sector remains safe and sound and continues to play an \nimportant role in the recovery and growth of the economy. The current \nbanking sector architecture is shown in Table 6\n Table 6: Banking Sector Architecture \nType of Institution \nNumber \nCommercial Banks \n14 \nBuilding Societies \n4 \nSavings Bank (POSB) \n1 \nTotal Banking Institutions \n19 \nOther Financial Institutions Under the Supervision of the Reserve Bank \nCredit-only-MFIs \n188 \nDeposit-taking MFIs \n7 \nDevelopment Financial Institutions (SMEDCO, IDBZ, IDCZ and AFC \nLand & Development Bank) \n4 \nTotal Other Institutions \n199 \nTotal Number of Institutions \n218 \n \n69. The number of building societies reduced from five (5) to four (4) following \nthe merger between CBZ Bank and CBZ Building Society, effective 30 \nSeptember 2022 and consequently the cancellation of the building society’s \nlicence. \n70. Following the Bank’s pre-opening inspection which assessed Time Bank’s \nreadiness to conduct banking business, the banking institution was \nauthorized to recommence some banking business effective 27 October \n2022, bringing the number of operating commercial banks to 14. Time Bank \nwas authorised to conduct limited banking activities and is not permitted to \n36 \n \ntake deposits from the public in line with its business strategy and having \nregard to the institution’s risk management structures and processes, level \nof capitalisation, as well as corporate governance arrangements. \n\nFinancial Soundness Indicators \n71. The banking sector remains well capitalized with adequate levels of \nliquidity, high earnings performance and low levels of non-performing \nloans. Key banking sector financial soundness indicators are depicted in \nTable 7. \n \nTable 7: Financial Soundness Indicators \nKey Indicators \nBenchmark \nDec- 21 \nMar-22 \nJun-22 \nSep-22 \nDec-22 \nTotal Assets \n- \n$762.96bn \n$969.24bn \n$1.94tn \n$3.11tn \n$3.81tn \nTotal Loans & \nAdvances \n- \n$229.94bn \n$320.36bn \n$603.14bn \n$1.01tn \n$1.29tn \nNet Capital Base \n- \n$122.85bn \n$170.00bn \n$349.48bn \n$535.96bn \n$746.30bn \nCore Capital \n- \n$100.83bn \n$138.21bn \n$284.74bn \n$438.11 bn \n$611.11bn \nTotal Deposits \n- \n$476.35bn \n$582.26bn \n$1.12tn \n$1.91tn \n$2.29tn \nNet Profit \n- \n$59.29bn \n$27.05bn \n$181.25bn \n$342.28bn \n$503.13bn \nReturn on Assets \n- \n12.04% \n3.39% \n8.67% \n16.48% \n17.43% \nReturn on Equity \n- \n43.16% \n12.43% \n31.60% \n53.19% \n54.33% \nCapital Adequacy \nRatio \n12% \n32.86% \n35.16% \n33.87% \n35.45% \n37.15% \nTier 1 Ratio \n8% \n26.54% \n26.97% \n18.84% \n23.97% \n26.92% \nLoans to Deposits Ratio \n60% \n48.27% \n55.02% \n53.69% \n52.83% \n55.67% \nNPLs Ratio \n5% \n0.94% \n1.57% \n1.50% \n1.41% \n1.58% \nLiquidity Ratio \n30% \n64.37% \n61.38% \n60.78% \n59.51% \n59.50% \n\nBanking Sector Capitalization \n72. As at 31 December 2022, the banking sector was adequately capitalized, \nwith all banking institutions in compliance with the prescribed minimum \ncapital adequacy ratio of 12% and tier 1 ratio of 8%. The average capital \nadequacy and tier 1 ratios were 37.15% and 26.92%, respectively. \n37 \n \n73. Aggregate core capital increased by 114.62% from ZW$284.74 billion as at \n30 June 2022 to ZW$611.11 billion as at 31 December 2022. The growth in \ncore capital was mainly attributed to the capitalisation of retained earnings \n(including revaluation gains from investment properties, translation gains \nfrom foreign exchange-denominated assets) and capital infusion by \nshareholders. \n \n74. The banking sector capital position is considered adequate to absorb \nunexpected shocks or losses as well as ensuring business continuity. \n \n75. Fifteen (15) out of 18 banking institutions (excluding POSB) reported core \ncapital levels that comply with minimum capital requirements as shown in \nTable 8. \n \nTable 8: Core Capital levels as at 31 December 2022. \nInstitution \nReported \nCore \nCapital as at 31 Dec \n2022 (ZW$) \nReported \nCore \nCapital 31 Dec 2022 \n** (US$) \nCapital Adequacy \nRatio (CAR). \n(Min 12%) \nCompliance Status \nCOMMERCIAL BANKS \nAFC Commercial Bank \n22,524,556,486.52 \n 32,773,307.10 \n32.51% \nCompliant \nBancABC \n21,581,976,221.21 \n 31,401,849.57 \n26.11% \nCompliant \nFirst Capital Bank \n25,604,119,031.15 \n 37,254,081.18 \n27.55% \nCompliant \nCBZ Bank \n69,507,843,789.03 \n 101,134,151.59 \n23.27% \nCompliant \nEcobank \n42,023,653,281.55 \n 61,144,559.95 \n27.16% \nCompliant \nFBC Bank \n27,996,177,012.50 \n 40,734,533.77 \n20.85% \nCompliant \nNedbank \n22,955,495,314.57 \n 33,400,324.57 \n33.93% \nCompliant \nMetbank \n79,718,887,152.76 \n 115,991,254.78 \n83.14% \nCompliant \nNMB Bank \n30,195,883,396.61 \n 43,935,114.12 \n22.64% \nCompliant \nStanbic Bank \n83,986,179,273.98 \n 122,200,179.48 \n29.40% \nCompliant \nStandard Chartered \nBank \n16,729,741,368.53 \n 24,341,831.19 \n39.14% \nCompliant on CAR \nand Non-Compliant \non the prescribed \nminimum core \ncapital \nSteward Bank \n23,653,963,114.51 \n 34,416,597.62 \n50.42% \nCompliant \n38 \n \nInstitution \nReported \nCore \nCapital as at 31 Dec \n2022 (ZW$) \nReported \nCore \nCapital 31 Dec 2022 \n** (US$) \nCapital Adequacy \nRatio (CAR). \n(Min 12%) \nCompliance Status \nTime Bank \n$4,352,829,141.00 \n \n6,333,381. 36 \n \n 83.47% \nCompliant on CAR \nand Non-Compliant \non the prescribed \nminimum core \ncapital \nZB Bank \n38,284,515,215.16 \n 55,704,101.21 \n21.93% \nCompliant \nBUILDING SOCIETIES \nCABS \n59,498,052,324.14 \n 86,569,870.61 \n30.20% \nCompliant \nFBC Building Society \n15,281,358,097.20 \n 22,234,428.55 \n40.05% \nCompliant \nNational Building \nSociety \n14,216,018,409.36 \n 20,684,355.64 \n37.44% \nCompliant \nZB Building Society \n11,110,787,941.31 \n 16,166,234.64 \n56.20% \nCompliant on CAR \nand Non-Compliant \non the prescribed \nminimum \ncore \ncapital \nSAVINGS BANK \nPOSB \n6,236,675,367.21 \n 9,074,384.09 \n41.30% \nNo \nprescribed \nminimum \ncapital \nrequirement \n\n 7KHSUHVFULEHGPLQLPXPFDSLWDOUHTXLUHPHQWVLV=:HTXLYDOHQWWR86PLOOLRQIRU7LHU,EDQNLQJLQVWLWXWLRQV\nDQG86PLOOLRQIRU7LHU,,EDQNLQJLQVWLWXWLRQVLQFOXGLQJEXLOGLQJVRFLHWLHV\n\n:LOOLQJEX\\HUZLOOLQJVHOOHUH[FKDQJHUDWHLQWHUEDQNUDWH 86DVDW'HFHPEHU\n\n\n76. Standard Chartered Bank is finalising its recapitalization processes pending \nthe disposal of the institution by its shareholders, while the capital position \nof ZB Building Society is dependent on the outcome of the current strategic \ninitiatives within the Group. In line with the approval to recommence \nbanking business, Time Bank was permitted to gradually meet the \nprescribed minimum capital requirements in terms of its strategy which \nprovides for a phased approach to conducting banking activities. \n \n77. The Bank will continue to monitor progress periodically to ensure on-going \ncompliance with prescribed minimum capital requirements. Meanwhile, \nindependent external audits for the financial year ended 31 December 2022 \nare underway. The external audits and the capital verification exercise by \nthe Bank will confirm the core capital levels declared by banking institutions \nas at 31 December 2022, with banks having been given authority by the \n39 \n \nBank to use the interbank rate or the auction rate in finalizing their 2022 \nfinancials. \n\nBanking Sector Assets Structure \n78. Total banking sector assets amounted to ZW$3.81 trillion as at 31 December \n2022, up from ZW$768.46 billion as at 31 December 2021. The dominant \nassets on the bank balance sheets are loans and advances (31.81%), \nsecurities and investments (14.49%) and balances with the central bank \n(11.37%) as shown in Figure 15. \n \n Figure 15: Assets Mix as at 31 December 2022 \n\n \nBanking Sector Loans and Advances \n79. Aggregate banking sector loans and advances increased by 114.46% from \nZW$603.14 billion as at 30 June 2022 to ZW$1.29 trillion as at 31 December \nDomestic Notes \nand Coins\n7.90%\nBalances with \nCentral Bank\n11.37%\nBalances with \nDomestic Banking \nInstitutions\n3.27%\nAssets in Transit\n0.05%\nBalances with \nForeign \nInstitutions\n9.34%\nSecurities and \nInvestments\n14.49%\nLoans, Advances, \nBankers \nAcceptances and \nLeases\n31.81%\nForeign Claims (Including \nBills of Exchange)\n0.67%\nRepossessed \nProperties / Assets\n0.18%\nFixed Assets\n11.16%\nOther Assets\n5.60%\nOff-Balance Sheet \nItems\n4.16%\n40 \n \n2022. The increase was largely attributed to an increase in foreign currency-\ndenominated loans, leading to the increase in their proportion from 65.87% \nas at 30 June 2022 to 78.20% of total banking sector loans. \n \n80. The level of financial intermediation as measured by total loans to total \ndeposit ratio, improved from 52.83% recorded as at 30 June 2022, to 55.67% \nas at 31 December 2022. The foreign currency loans to foreign currency \ndeposits ratio as at 31 December 2022 was 62.69% whilst the ZW$ loans to \ndeposit ratio was 41.40% as at the same reporting date. \n \n81. The banking institutions continue to play an important role in supporting the \nproductive sectors which contribute towards economic recovery and growth. \nThe loans to the productive sectors constituted 78.45% of total loans as at \n31 December 2022 up from 71.12% reported as at 30 June 2022. \n \n82. Figure 16 shows the sectoral distribution of loans as at as at 31 December \n2022. \n41 \n \n Figure 16: Sectoral distribution of loans as at 31 December 2022 \n\nSource: RBZ \n \nAsset Quality \n83. Banking sector asset quality is satisfactory as non-performing loans (NPLs) \nhave remained stable at low levels. As at 31 December 2022, the average \nNPLs to total loans ratio for the banking sector was 1.58%, comparing \nfavourably with the generally acceptable international threshold of 5%. \n \n84. Figure 17 shows the trend in the level of NPLs ratios from December 2019 \nto December 2022, signifying the positive role played by the Zimbabwe \nAsset Management Company (ZAMCO) and the improved credit risk \nmanagement strategies being implemented by banks to contain NPLs. \n \nConsumptive\n17.65%\nOther\n3.90%\nAgricultural\n22.94%\nManufacturing\n9.42%\nCommercial\n6.44%\nMining\n9.71%\nDistribution\n8.03%\nConstruction\n0.99%\nTransport\n1.84%\nCommunication\n0.64%\nFinancial\n12.71%\nMortgage\n5.73%\nProductive\n78.45%\n42 \n \n Figure 17: Trend in Non- Performing Loans \n\n \n85. ZAMCO wound down its operations on 31 August 2022, more than a year \nbefore its sunset period of 31 December 2023. \n \nBanking Sector Profitability \n86. All banking institutions were profitable with reported aggregate profits of \nZW$503.13 billion for the year ended 31 December 2022, a 748.59% \nincrease from ZW$59.29 billion reported in the corresponding period in \n2021. \n \n87. The growth in the banking sector income largely emanated from non-interest \nincome, which constituted 67.82% of total income as at 31 December 2022, \nup from 54.35% reported in the corresponding period in 2021. \n \n1.75\n1.42\n1.03\n0.31\n0.36\n0.55\n0.61\n0.94\n1.5\n1.41\n1.58\n0\n1\n2\n3\n4\n5\n6\nDec-19\nMar-20\nJun-20\nDec-20\nMar-21\nJun-21\nSep-21\nDec 2-21\nJun-22\nSep-22\nDec-22\nNPL (%)\nNPL\nBenchmark\n43 \n \n88. The income mix for the sector is depicted in Figure 18. \n \nFigure 18: Banking Sector Income Mix as at 31 December 2022 \n\n \n89. The total non-interest income mainly consists of revaluation gains from \ninvestment properties (62.88%), fees and commissions (29.15%) and \ntranslation gains on foreign currency-denominated assets (7.98%). \n \n90. The return on assets and return on equity ratios were 17.43% and 54.33% as \nat 31 December 2022, compared to 11.50% and 42.21% as at 31 December \n2021, respectively. The trend of banking sector performance over the period \n30 September 2020 to 31 December 2022 is shown in Figure 19. \nNotes and Coins\n0.13%\nBalances with \nCentral Bank\n11.86%\nBalances with \nDomestic Banking \nInstitutions\n3.42%\nAssets in Transit\n0.05%\nBalances with Foreign \nInstitutions and Foreign \nCash\n17.86%\nSecurities and \nInvestments\n15.12%\nLoans, Advances, \nBankers \nAcceptances and \nLeases\n33.19%\nForeign Claims \n(Including Bills of \nExchange)\nRepossessed \nProperties / \nAssets\n0.19%\nFixed Assets\n11.65%\nOther Assets\n5.84%\n44 \n \n Figure 19: Banking sector performance \n\n\nBanking Sector Deposits and Liquidity \n91. The average prudential liquidity ratio was 59.50% as at 31 December 2022, \nlargely reflecting high stock of liquid assets in the sector. The trend in the \nliquidity ratio from 31 December 2018 to 31 December 2022 is shown in \nFigure 20. \n12.50%\n13.55%\n0.96%\n4.78%\n8.23% 12.04%\n3.39%\n8.67%\n16.48%\n17.43%\n40%\n45.54%\n5.90%\n18.71%\n31.87%\n43.16%\n12.43%\n31.60%\n53.25%\n53.19%\n0%\n10%\n20%\n30%\n40%\n50%\n60%\nSep-20\nDec-20\nMar-21\nJun-21\nSep-21\nDec-21\nMar-22\nJun-22\nSep-22\nDec-22\nReturn on Assets\nReturn on Equity\n45 \n \n Figure 20: Prudential Liquidity Ratio Trend\n\n92. Total deposits increased by 103.57% from ZW$1.12 trillion as at 30 June \n2022 to ZW$2.28 trillion as at 31 December 2022 mainly driven by growth \nin foreign currency deposits. Commercial banking sub-sector deposits \nconstituted 91.15% of total banking sector deposits. \n \n93. Foreign currency deposits accounted for 64.24% of total deposits as at 31 \nDecember 2022. The trend of banking sector deposits over the period 30 \nSeptember 2019 to 31 December 2022 is shown in Figure 21. \n \n70.66%\n64.77%\n72.42%\n74.85%\n73.06%\n66.89%\n64.37%\n62.09%\n52.83%\n59.50%\n0%\n10%\n20%\n30%\n40%\n50%\n60%\n70%\n80%\nDec-18\nJun-19\nDec-19\nJun-20\nDec-20\nJun-21\nDec-21\nJun-22\nSep-22\nDec-22\nindustry average\nminimum requirement\n46 \n \nFigure 21: Trend in Banking Sector Deposits \n\n \nBank Charges \n94. The pricing model agreed between the Bank and Bankers Association of \nZimbabwe (BAZ) in May 2022, will continue to guide the review of \ntransactional charges and service fees. Banking institutions are urged to \nmaintain a balance between business viability and the provision of \naffordable and accessible products and services in the spirit of promoting \nfinancial inclusion and the use of electronic means of payments. \n \n95. The Bank shall continue to monitor the terms and conditions of business \nactivities to ensure adherence to fair business practices and reasonable \npricing in line with the Banking Act, and the Consumer Protection \nFramework. \n \n \n \n21.51\n34.50\n97.40\n154.47\n204.13\n241.74\n311.50\n367.02\n476.35\n1,124.73\n1,911.57\n2,286.92\n30-SEP-19\n31-DEC-19\n30-JUN-20\n30-SEP-20\n31-DEC-20\n31-MAR-21\n30-JUN-21\n30-SEP-21\n31-DEC-21\n30-JUN-22\n30-SEP-22\n31-DEC-22\nZW$ Billions\n47 \n \nClimate Risk Management \n96. Climate change is one of the major emerging risks to financial stability. The \nBank remains alive to the impact of climate-related risks on the banking \nsector through macro and microeconomic transmission channels. In this \nregard, various initiatives are underway to ensure that the risk is identified, \nmitigated and effectively managed. \n \n97. In the outlook, the Bank will be focusing on the identification of climate risk \nkey drivers and transmission channels in the banking sector, assessing the \nimpact of climate risk on macroeconomic variable, and development of \nclimate risk management policy framework. \n \nEnhancement of Liquidity Profile Resilience \n98. As part of the efforts the promote the short-term resilience of the liquidity \nprofile of banking institutions, the Bank is implementing Basel III Liquidity \nStandards, including the Liquidity Coverage Ratio (LCR). \n \n99. To this end, the Bank issued Prudential Standard No: 02-2022/BSD: \nGuidance on the Implementation of the Liquidity Coverage Ratio in \nDecember 2022. The main objective of the Standard is to ensure that \nbanking institutions have an adequate stock of unencumbered high-quality \nliquid assets that can be converted easily or immediately into cash to meet \nliquidity needs in stress situations. \n \n100. Banking institutions have been requested to submit implementation plans \nbefore the end of February 2023, that incorporate the development / \n48 \n \nreinforcement of policies, processes, models and systems to ensure the \navailability of requisite capacity to facilitate sound determination of the \ncomponents of LCR computation. \n \nSustainability \n101. Globally, sustainability is a subject rising on the agenda of the financial \nservices sector’s and the adoption of sustainability principles is considered \nan essential lever for achieving social, economic and environmental goals in \nmost economies. \n \n102. Cognizant of the role that financial and non-financial institutions play and \ncontribute to inclusive, sustainable economic development, the Bank \ncontinues to work closely with several financial institutions in the \nimplementation of the Sustainability Standards & Certification Initiative \n(SSCI) being driven by the European Organization for Sustainable \nDevelopment (EOSD). \n \n103. As at 31 December 2022, 12 banking institutions, including one (1) deposit-\ntaking microfinance institution, were participating under the Bank-led \nSustainability Standards and Certification Initiative (SSCI). \n \n104. Given the noted benefits of ingraining sustainability considerations in the \nfinancial sector, the Bank will continue to raise awareness on the importance \nof sustainability and recommend more financial institutions embrace the \nadoption of sustainable banking practices. The Bank, thus, urges banking \ninstitutions to be adaptive, enhance capacity in the area of sustainability and \nbecome sustainability centric. \n49 \n \n \nFinancial Inclusion \n105. The National Financial Inclusion Strategy II 2022-2026 (NFIS II) was \nlaunched on 31 October 2022 following an extensive collaborative and \nconsultative process. \n \n106. The main focus of the NFIS II is to increase the usage of formal financial \nservices by the target segments, and in this regard, banking institutions and \ndigital financial services will continue to play a critical role in deepening \nfinancial inclusion. \n \n107. An implementation plan to operationalise the NFIS II is now in place and \nFinancial Literacy, Consumer Education and Consumer Protection will be \nkey in promoting financial knowledge and confidence among target \nsegments in the uptake and usage of formal financial services. \n \n108. A Monitoring and Evaluation Framework has also been developed to track \nthe implementation of the National Financial Inclusion Strategy, on an \nongoing basis. \n \n \nSupervision of Large SACCOS \n109. The 2022 FinScope Consumer Survey revealed that savings and credit co-\noperatives societies (SACCOS), which constitute a significant segment of \nthe microfinance sector played a key role in savings mobilisation among the \ngrassroots communities. \n \n50 \n \n110. In this regard, as part of the implementation of the NFIS II, the Bank will \ncontinue with its engagements with the Ministry of Women Affairs, \nCommunity, Small and Medium Enterprises Development in the \ndevelopment of the SACCOS and in strengthening supervisory oversight in \nline with regional and global standards. \n \nCredit Infrastructure \n \nCredit Information Sharing Environment \n111. The sustained availability and growth of the credit data both at the Credit \nRegistry and the three private credit bureaus continue to play a critical role \nin the origination and ongoing management of credit risk in the financial \nsector. \n \n112. The four (4) credit reporting institutions in the country held over 20 million \nsearchable records as at 31 December 2022. The entire database received \nmore than 1.6 million enquiries during 2022 from users across various \neconomic sectors. Figure 22 indicates the cumulative records per institution. \n51 \n \nFigure 22: Cumulative Loan Record per Institution \n \n\n113. In the Credit Registry database, 598,137 were active loan accounts with \nindividual records accounting for 98% of the active loan records. Registered \nsubscribers accessing the Credit Registry were 238 as at 31 December 2022, \nas shown in Figure 23. \n \n15,632,698\n1,917,464\n1,824,501\n368,423\nFCB\nCREDIT REGISTRY\nXDS ZIM\nFINCHECK\n52 \n \n Figure 23:Credit Registry Loan Records as at 31 December 2022 \n\n\n114. Figure 24 indicates the phenomenal growth in Credit Registry usage since \nits inception. \nFigure 24: Credit Registry Usage Status \n\nClosed, 1,383,954\nOpen, 598,137\n13,011\n116,491\n261,801\n440,407\n566,298\n700,662\n813,298\n976,491\n1,317,853\n1,956,678\n2,079,926\n2,252,821\n2,471,853\n2,750,658\n0\n500,000\n1,000,000\n1,500,000\n2,000,000\n2,500,000\n3,000,000\nJun-17\nSep-17\nDec-17\nMar-18\nJun-18\nSep-18\nDec-18\nMar-19\nJun-19\nSep-19\nDec-19\nMar-20\nJun-20\nSep-20\nDec-20\nMar-21\nJun-21\nSep-21\nDec-21\nMar-22\nJun-22\nSep-22\nDec-22\nNumber of Inquiries\n53 \n \n115. Gender distribution of loans is generally skewed towards male borrowers \nwho constituted 68.4%, while female borrowers constituted 31.6% of loan \ncontracts in the Credit Registry. \n \n116. The Credit Registry database indicates that 6.5% of total loans granted to \nfemale borrowers were delinquent contracts while male borrowers have \nmore delinquent loans at 6.9% as shown in Figure 25. \n \nFigure 25: Percentage of Delinquent Loan Contracts by Gender \n\n \n117. With effect from 1 January 2023, the Bank commenced the implementation \nof the Phase 2 of the Credit Registry operations which entails bringing \nonboard microfinance institutions as data providers. This initiative is \nexpected to enrich and broaden the scope of credit registry database for the \nbenefit of subscribers. \n \nCollateral Registry \n118. Following the successful launch of the Collateral Registry in November \n2022, banking institutions and some microfinance institutions have since \ncreated their profiles in the Collateral Registry system in readiness to \nregister movable security supporting borrowings. The sector has also \n6.9%\n6.5%\n1.0%\n2.0%\n3.0%\n4.0%\n5.0%\n6.0%\n7.0%\nMale\nFemale\n54 \n \ncommenced instituting the necessary adjustments to internal policies and \nprocedures to align with the requirements of the Collateral Registry system. \n \n119. Starting in the first quarter of 2023, the Bank has scheduled further outreach \nand awareness programs for MFIs, MSMEs and other stakeholders who \nwere not covered in the initial phase. \n \nDeposit-Taking Microfinance Institutions’ Capitalisation \n120. As at 31 December 2022, the deposit-taking microfinance institutions \n(DTMFIs) subsector was not adequately capitalized, with only two (2) out \nof the seven (7) operating deposit-taking microfinance institutions being \ncompliant with the minimum capital requirements of the ZW$ equivalent of \nUS$5 million. The sub-sector has not been able to significantly grow its \ncapital over the year with some of the DTMFIs posting losses since \ninception. \n \n121. Aggregate core capital for the sub-sector of ZW$11.68 billion as at 31 \nDecember 2022 represents a 17.51% increase over the quarter from \nZW$9.94 billion as at 30 September 2022. \n \n122. The reported minimum capital levels for the DTMFIs as at 31 December \n2022 are indicated in Table 9. \n \n55 \n \nTable 9: DTMFI Sub-Sector Capitalization (Minimum Requirement US$5m) \nInstitution \nCore \nCapital\n30.09.2022 \n(ZW$ million) \nCore \nCapital \n31.12.2022 \n(ZW$ million) \nCore \nCapital \n31.12.2022 \n(US$ \nmillion)* \nStatus of Compliance \nAfrican \nCentury \nLimited \n3,722.79 \n3,836.00 \n5.58 \nCompliant \nInnbucks \nMicrobank \n(formerly \nNdoro \nMicrofinance) \n2,780.52 \n3,675.42 \n5.35 \nCompliant \nSuccess \nMicrofinance \nBank \n1,356.72 \n1,830.48 \n2.66 \nNon-Compliant \nZimbabwe \nWomen’s \nMicrofinance \nBank \n803.39 \n707.76 \n1.03 \nNon-Compliant \nEmpowerBank \nLimited \n970.11 \n1,332.76 \n1.94 \nNon-Compliant \n \nGetBucks \nMicrofinance \nBank \n382.43 \n438.15 \n0.64 \nNon-Compliant \n \nLion \nMicrofinance \nBank \n-79.39 \n-143.94 \n-0.21 \nNon-Compliant \n\n&RQYHUWHGXVLQJWKH:LOOLQJ%X\\HU:LOOLQJ6HOOHU([FKDQJH5DWHRI86 DVDW\n'HFHPEHU\n\n123. The DTMFIs need to be adequately capitalised on an ongoing basis to \ncapacitate the institutions to play a more critical role in fostering financial \ninclusion. In this regard, the Boards and shareholders should remain \nresolutely focused on implementing measures including viable strategic \noptions that bolster the institutions’ capital levels. \n \nPortfolio Quality \n124. The total sub-sector loans of ZW$7.21 billion as at 31 December 2022 \nrepresent a 39.19% increase from ZW$5.18 billion as at 30 September 2022. \nPortfolio quality improved as evidenced by the decline in the Portfolio-at-\nRisk (PaR) ratio (>30 days) of 15.22%, down from 19.36% as at 30 \n56 \n \nSeptember 2022. However, the ratio compares unfavourably with the \ninternational benchmark of 5%. It is, therefore, imperative for the \ninstitutions to strengthen their credit risk management practices and internal \ncontrols to improve the quality of their loan portfolios. \n \n \nEarnings Performance \n125. The subsector recorded an improvement in the aggregate earnings from \nZW$29.49 million for the period ended 31 December 2021, to ZW$6.53 \nbillion for the period ended 31 December 2022. The earnings performance \nwas, however, largely driven by revaluation gains on investment properties \nand foreign currency-denominated assets. \n \n126. Four (4) institutions namely African Century limited, Getbucks \nMicrofinance, Innbucks Microbank and Success Microfinance reported \nprofits during the period ending 31 December 2022. This underscores the \nneed for the institutions to review their business models and institute \ncredible \nrevenue \nenhancement \nmeasures \nto \nensure \ninstitutional \nsustainability. \n\nNATIONAL PAYMENT SYSTEMS \n127. To ensure stability and compliance of the national payment systems, the \nBank conducted on-site examinations and off-site analysis during the second \nhalf of 2022. Consequently, the payment systems comprising twenty-four \n(24) payment system providers and twenty-five (25) participant banks \nremained sound, safe, and stable characterized by growth in transaction \nactivities. \n \n57 \n \n128. Digital payment systems transaction values continued on an upward \ntrajectory with a 220% growth to ZW$33.2 trillion in 2022. The volume of \ntransactions, on the other hand, recorded a decrease of 22% to 1.13 billion \nduring 2022, as shown in Figure 26. \n \nFigure 26: Digital Payment Systems Annual Values and Volumes for 2015 to 2022 \n \n \nReal Time Gross Settlement (RTGS) \n129. The improved performance was witnessed on the Zimbabwe Electronic \nTransfer and Settlement System (ZETSS) also known as the Real Time \nGross Settlement system. In this regard, RTGS transaction values increased \nby 355% to ZW$22.5 trillion in 2022 from ZW$4.9 trillion in 2021. \nTransaction volumes rose marginally by 3.4% to 12.9 million in 2022 \ncompared to the previous year. Figure 27 shows RTGS annual volumes and \nvalues from 2015 to 2022. \n \n0.0\n0.5\n1.0\n1.5\n2.0\n2.5\n0.0\n5.0\n10.0\n15.0\n20.0\n25.0\n30.0\n35.0\n2015\n2016\n2017\n2018\n2019\n2020\n2021\n2022\nVolumes in Billions\nValues in Tillions\nValues LHS\nVolumes RHS\n58 \n \n Figure 27: RTGS Annual Values and Volumes 2015 to 2022 \n \n \nCybersecurity \n130. The ecosystem of cybersecurity is ever-changing and cyber-attacks continue \nto expand in scale and scope. In this regard, the Bank remains attentive to \ndigital financial services whose elevated cyber security and money \nlaundering threats have implications for financial stability. \n \n131. The Bank encourages financial institutions to share information on cyber \nsecurity through incident reporting, increase education and awareness \ncampaigns and to collaborate with other key stakeholders involved in cyber \nsecurity matters. \n \nEuro Mastercard and Visa Compliance (EMV) \n132. The Bank continues to encourage financial services providers to expedite \nthe phasing out of non-EMV of compliant access points and devices in the \nmarket as part of enhancing cyber security risk management. \n \n133. The market has so far only achieved 39% and 32% compliance for Cards \nand Point of Sale, respectively. \n 0.0\n 2.0\n 4.0\n 6.0\n 8.0\n 10.0\n 12.0\n 14.0\n0.0\n5.0\n10.0\n15.0\n20.0\n25.0\n2015\n2016\n2017\n2018\n2019\n2020\n2021\n2022\nVolumes in Millions\nValues in Trillions\nValues LHS\nVolumes RHS\n59 \n \nSWIFT ISO 20022 Requirements for Cross-Border Payments \n134. The financial services industry’s payment messaging systems are moving \nrapidly to adopt ISO 20022, which will be the new standard for SWIFT \npayment messages globally by 31 March 2023. \n \n135. The Bank has noted that all the users of SWIFT in the country are committed \nto implementing the new ISO format and that testing is being undertaken to \nensure readiness by the Go-live date, together with the rest of the SWIFT \nglobal community. \n \nImplementation of AML–CFT Preventative Measures \n136. The Bank remains committed to mitigating money laundering and the \nfinancing of terrorism and proliferation risks in the payment, clearing, and \nsettlement systems. This is being undertaken through the implementation of \nrisk-based off-site analysis and onsite examinations in line with the Money \nLaundering and Proceeds of Crime Act as well as Financial Action Task \nForce (FATF) recommendations. \n \n137. The Bank urges payment systems services providers to continuously \nmonitor financial transactional activities to effectively assess and manage \nmoney laundering and terrorism financing risk as well as compliance with \nAML/CFT preventive measures. \n \n138. Given the heightened volumes and cyber risks, payment service providers \nand banks are urged to deploy appropriate regulatory technologies (Regtech) \nto enhance compliance. \n \n60 \n \nInteroperability \n139. The direct transfers processed through mobile, internet, POS, and ATM \nplatforms integrated into the national switch showed an upward trajectory in \nvalues and a mixed trend in volumes during 2022, as shown in Figure 28. \n \nFigure 28: Retail Payment Systems Interoperability for 2022 \n \n \nMarket Conduct and Consumer Protection \n140. Digital financial services (DFS) have delivered substantial financial \ninclusion benefits and contributed immensely to economic growth and \ndevelopment. Among the positive impacts on consumers are improved \ntransacting culture, convenience, and a useful management tool during \nnatural disasters/pandemics such as COVID-19. \n \n141. To increase consumer awareness of digital financial services, the Bank has \npartnered with the Post and Telecommunication Regulator Authority of \nZimbabwe and the Consumer Council of Zimbabwe to conduct road shows \nacross the country. \n0.0\n0.5\n1.0\n1.5\n2.0\n2.5\n3.0\n3.5\n4.0\n4.5\n0\n10\n20\n30\n40\n50\n60\nMillions\nBillions ZW$ \nValues LHS\nVolumes RHS\n61 \n \n142. Financial services providers are encouraged to also put in place education \nand awareness programs that ensure the protection of consumer rights. \n \nLicensing and New Initiatives \n143. During the period under review, the Bank received fifty (50) applications \nfrom both financial institutions and other prospective payment system \nproviders. \n \n144. The applications are at various stages within the Bank’s approval process \nsystem with twenty-four (24) product additives and enhancements approved \nfor existing services, fifteen (15) provided with appropriate guidance, seven \n(7) products still work in progress whilst two (2) were rejected. \n \n \nPan African Payment and Settlement System (“PAPSS”) \n145. The Country signed up to the Pan African Payment and Settlement System \n(PAPSS) agreement in March 2022 to be part of a project which is being \ndeveloped in collaboration with Afreximbank. \n \n146. PAPSS is an interoperable cross-border financial market infrastructure \nenabling the integration of Africa’s financial markets to stimulate, hasten \nand sustain the pace of regional integration, economic growth and \ndevelopment and financial inclusiveness in the continent. \n \n147. As this is a payment system for cross-border transactions, banks will be \nadvised of their role as they handle most of the payments. \n \n \n62 \n \nFINTECH Regulatory Sandbox \n148. As of 31 December 2022, a total of twenty-three (23) applications had been \nreceived for sandboxing while twenty (20) additional applications were at \nvarious stages of evaluation. The applications received in the Regulatory \nSandbox were largely focused on financial inclusion products (26%), retail \npayments (18%) and equity crowdfunding (10%), as shown in Figure 29. \n \nFigure 29: Distribution of Applications to Regulatory Sandbox as of 31 December \n2022 \n \n \n63 \n \nSECTION FIVE \n EXTERNAL SECTOR DEVELOPMENTS \n \nGlobal and Regional Economic Developments \n \n149. The IMF in its January 2023 world economic outlook update, projected \nglobal economic growth to moderate to 2.9 % in 2023 from 3.4% in 2022, \nweighed down by elevated inflation pressures, tightening global financial \nconditions associated with high interest rates, particularly in the US and \nsome European economies as well as the negative spill-over effects from the \nRussia-Ukraine crisis. In addition, the persisting waves of the Covid-19 \npandemic also continue to disrupt economic activity in some regions. \n \n150. The global economy is projected to rebound to a 3.1% growth in 2024, \nsupported by the reopening of Chinese economy which has paved the way \nfor a faster global economic recovery. The IMF also projects global inflation \nto moderate from 8.8% in 2022 to 6.6% in 2023 and 4.3% in 2024. Table 10 \nshows the global and regional economic growth developments and outlook. \n \n \n64 \n \n Table 10 Global and Regional Economic Growth & Outlook (%) \nRegion/Country \n2021 Act. 2022 Proj. \n2023 Proj. \nWorld Output \n6.2 \n3.4 \n2.9 \nAdvanced Economies \n5.4 \n2.7 \n1.2 \n USA \n5.9 \n2.0 \n1.4 \n Euro-Area \n5.3 \n3.5 \n0.7 \n United Kingdom \n7.6 \n4.1 \n-0.6 \nEmerging Markets & Developing \nEconomies \n6.7 \n3.9 \n4.0 \n Emerging and Developing Asia \n7.4 \n4.3 \n5.3 \n China \n8.4 \n3.0 \n5.2 \n India \n8.7 \n6.8 \n6.1 \n Emerging and Developing Europe \n6.9 \n0.7 \n1.5 \n Russia \n4.7 \n-2.2 \n0.3 \nSub Saharan Africa \n4.7 \n3.8 \n3.8 \n Nigeria \n3.6 \n3.0 \n3.2 \n South Africa \n4.9 \n2.6 \n1.2 \n \n \nSource: IMF World Economic Outlook (WEO): October 2022 Update \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \nInternational Commodity Price Outlook \n151. Reflecting the anticipated slowdown in the global economy, commodity \nprices are expected to continue moderating, a development that will weigh \ndown on trade. Figure 30 shows developments in major commodity price \nindices for the year 2022 and the outlook. \n \n65 \n \n Figure 30: International Commodity Price Indices Development and outlook: \n(Nominal US$ 2010=100) \n \nSource: World Bank and Bloomberg, 2022 \n \nBalance of Payments Developments \n152. The country’s external sector remained relatively strong as evidenced by a \nsurplus current account balance estimated at US$305 million in 2022. This \nmarks the fourth consecutive year of current account surplus since 2019. The \nsector benefited from resilient remittance inflows, coupled with strong \nexport performance due to favourable commodity prices for key exports. \nThe current account surplus is projected to gradually decline over the \nmedium term, reflecting rising imports as the economy continues to recover \nand the adverse effects of the slowdown in the global economy. \n \n153. The sustained current account surplus continues to be driven by strong \nremittances. The deficits in the goods, services, and primary income \naccounts were moderated by strong performance in the secondary account \nwhich records transfers to international organisations and individuals \n(remittances). \n0\n20\n40\n60\n80\n100\n120\n140\n160\n180\n200\n2018\n2019\n2020\n2021\n2022\n2023f\n2024f\nEnergy\nFood\nBase Metals\nPrecious Metals\n66 \n \n \nFigure 31: Current Account Developments (US$ millions) \n \nSource: RBZ and Zimstat estimates \n \n154. The positive balance of payment position was buttressed by robust \nperformance in foreign currency receipts in the country which increased \nfrom US$9.86 billion in 2021 to US$11.57 billion in 2022, as shown in \nTable 11. \n \n \n \n \n-1500\n-1000\n-500\n0\n500\n1000\n1500\n-2000\n-1000\n0\n1000\n2000\n3000\n4000\n2016\n2017\n2018\n2019\n2020\n2021\n2022\nTrade Bal\nServices Bal\nPrimary Income Bal\nSecondary Income Bal\nCurrent Ac Bal\n67 \n \n \nTable 11:Total Foreign Currency Receipts (US$ millions) \nType of Receipt \nYear 2022 (US$ Million) \nYear 2021 (US$ Million) \n% \nChange \nAmount \n(US$ \nMillions) \n% \nContribution \nAmount \n(US$ \nMillions) \n% \nContribution \n \nExport \nProceeds \n7,419.50 \n64% \n6,371.30 \n65% \n16.5% \nInternational \nRemittances \nDiaspora \nRemittances \n1,658.36 \n14% \n1,430.14 \n15% \n16.0% \nNGOs \n1,136.80 \n10% \n975.16 \n10% \n16.6% \nLoan \nProceeds \n1,020.75 \n9% \n876.06 \n9% \n16.5% \nIncome \nreceipts \n145.45 \n1% \n118.93 \n1% \n22.3% \nForeign \nInvestment \n184.86 \n2% \n91.14 \n1% \n102.8% \nTOTAL \n11,565.71 \n100% \n9,862.73 \n100% \n17.3% \n \nExports Receipts \n155. Cumulative export earnings or proceeds as at 31 December 2022 were \nUS$7.42 billion compared to US$6.37 billion earned during the same period \nin 2021. This represents an increase of 16.5% in 2022. The mining sector \nexport earnings accounted for 75.8% of the total export earnings in 2022, \nunderlying the need for diversification and broadening of the export base. \nTable 12 shows export earnings/proceeds by sector as at 31 December 2022. \n \n \n \n68 \n \n Table 12: Exports Earnings by Sector (US$ million) \nSector \n31 Dec 2022 \n31 Dec 2021 \n% Change \nMining \n5,627.50 \n5,011.50 \n12.3% \nPlatinum \n2,269.40 \n3,019.50 \n-24.8% \nGold \n2,462.00 \n1,210.10 \n103.5% \nChrome ore + Ferrochrome \n247.1 \n173.5 \n42.4% \nDiamonds \n112.8 \n244.7 \n-53.9% \nOther minerals \n536.2 \n363.7 \n47.4% \nTobacco \n968.1 \n575.5 \n68.2% \nTourism \n263.6 \n112.7 \n133.9% \nManufacturing \n203.1 \n175.8 \n15.5% \nTransport \n157.9 \n186.9 \n-15.5% \nAgriculture (General) \n144.6 \n169.1 \n-14.5% \nHorticulture \n42.1 \n40.1 \n5.0% \nPostal & Telecommunications \n10.1 \n27 \n-62.6% \nGeneral Services \n2.5 \n72.7 \n-96.6% \nTotal \n7,419.5 \n6,371.3 \n16.5% \n \n156. Minerals underpinned merchandise exports performance in 2022, growing \nby 12.3%, from US$5,011 million in 2021 to US$5,627 million, on account \nof higher production coupled with favourable commodity prices for key \ncommodities. Agricultural exports increased from US$784.7 million in 2021 \nto US$1,154.8 million in 2022, led by tobacco, following a good season. \n \n \nForeign Payments Performance \n157. For the year 2022, banks processed foreign payments amounting to US$8.59 \nbillion, representing a 23.1% increase in foreign payments from US$6.98 \nbillion recorded for the same period in 2021. The major drivers of foreign \npayments are capital and intermediate goods, consistent with the increased \ncapacity utilisation. Also of significance are foreign payments for fuel and \n69 \n \nelectricity, driven by increased global energy prices. Table 13 shows foreign \npayments by category for the same period in 2022 and 2021. \n \nTable 13: Foreign Payments by Category in US$ Millions \nCategory \n2022 \n2021 \n% Variance \nContribution \n2022 \nContribution \n2021 \nMerchandise Imports (excl. \nenergy) \n4,528.60 \n 4,083.66 \n11% \n53% \n59% \n- Consumption & \nManufactured Goods \n1,271.58 \n 1,707.30 \n-26% \n15% \n24% \n- Capital Goods \n1,878.25 \n 1,472.16 \n28% \n22% \n21% \n- Intermediate Goods \n1,378.77 \n 904.21 \n52% \n16% \n13% \nEnergy (Fuel & Electricity) \n1,834.35 \n 980.79 \n87% \n21% \n14% \n- Fuel \n1,674.98 \n 855.35 \n96% \n19% \n12% \n- Electricity \n159.37 \n 125.44 \n27% \n2% \n2% \nService Payments \n888.05 \n 639.76 \n39% \n10% \n9% \n- Technical, Professional & \nconsultancy \n465.26 \n 285.83 \n63% \n5% \n4% \n- Software \n108.15 \n 74.85 \n44% \n1% \n1% \n- Other (tourism, edu, freight \netc) \n314.64 \n 279.08 \n13% \n4% \n4% \nIncome Payments (Profits, \nDividends) \n557.61 \n 462.00 \n21% \n6% \n7% \n- Dividends \n427.78 \n 328.43 \n30% \n5% \n5% \n- Interest Payments \n15.87 \n 11.88 \n34% \n0% \n0% \n- Other (Salaries, Expats, \nRental) \n113.95 \n 121.69 \n-6% \n1% \n2% \nCapital Remittances (Outward) \n613.99 \n 640.82 \n-4% \n7% \n9% \n- External Loan Repayments \n485.40 \n 551.39 \n-12% \n6% \n8% \n- Disinvestments \n44.27 \n 54.99 \n-19% \n1% \n1% \n- Foreign Investment \n84.32 \n 34.44 \n145% \n1% \n0% \nOther Payments \n168.51 \n 173.09 \n-3% \n2% \n2% \n- Card Payments \n142.88 \n 135.32 \n6% \n2% \n2% \n- Refunds \n25.63 \n 37.77 \n-32% \n0.3% \n0.5% \nTotal \n8,591.12 \n 6,980.12 \n23.1% \n100% \n100% \n \n70 \n \nServices Trade \n158. Trade in services recovered from the Covid-19 shock with travel, passengers \ntransport and other key services trending up. Resultantly, services exports \nincreased from US$215.7 million in 2021 to US$453.3 million in 2022. \nServices imports similarly rose from US$965.4 million in 2021 to \nUS$1,436.8 million in 2022. Travel services picked up, following the \nrelaxation of the Covid-19 containment measures with people now moving \nfreely across borders. Freight services also increased in line with increasing \nmerchandise exports and imports. \n \nRemittances \n159. As at 31 December 2022 total International Remittances amounted to \nUS$2.80 billion, an increase of 16% from 2021’s figure of US$2.40 billion. \nOf the total amount, diaspora remittances amounted to US$1.66 billion, a \n16% increase from US$1.43 billion received during the same period in year \n2021. \n\n160. Of the total diaspora remittances, 40% come from South Africa followed by \nthe United Kingdom (25%). Table 14 shows remittance by corridor. \n \n \n71 \n \n Table 14: Diaspora Remittances by Source \nCOUNTRY \nTOTAL PER SOURCE \nCOUNTRY \n% Contribution \nSouth Africa \n583,375,863 \n40% \nUnited Kingdom \n361,681,114 \n25% \nUnited States of America \n158,920,458 \n11% \nAustralia \n89,869,266 \n6% \nBotswana \n39,561,360 \n3% \nCanada \n41,342,011 \n3% \nIreland \n17,157,377 \n1% \nGermany \n11,556,748 \n1% \nNew Zealand \n9,463,072 \n1% \nMalawi \n8,840,620 \n1% \nOther Countries \n141,335,373 \n10% \nTotal MTAs \n1,463,103,262 \n88% \nBanking Channel \n195,256,636 \n12% \nTotal \n1,658,359,898 \n100% \n \nCapital and Financial Account Developments \n161. The capital account balance was in positive territory during the first nine \nmonths of 2022, on the back of continued official capital transfers from the \ncountry’s external development partners, in support of on-going and new \ngovernment projects. The capital account also continued to benefit from the \nsupport rendered by the country’s Development Partners. The support was \nspread on development programs and projects across various priority sectors \nof the economy. \n \n162. Direct investment into the country increased from US$237.5 million in 2021 \nto US$327.9 million in 2022, mainly reflecting efforts by Government to \n72 \n \nimprove the investment climate through a raft of reforms. Significant \nexpansions and new projects, particularly in the mining sector, also explain \nthe improvement in direct investment inflows. \n \n \n73 \n \nSECTION SIX \nNEW MONETARY POLICY MEASURES \n \n163. The Bank has been using reserve money targeting as its anchor for monetary \npolicy since 2020, until June 2022, when reserve money-inflation-exchange \nrate relationships began to weaken. As a result of the breakdown in the direct \nlink between reserve money and inflation, the Bank shifted towards using a \ncombination of interest rate and exchange rate targeting as the policy \nnominal anchors. The adjustment of the policy interest rate and continued \nsterilisation interventions through the foreign exchange auction system and \nsale of gold coins have been the major contributing factors towards the \ncurrent downward trend in inflation. \n \n164. This two-pronged approach to dealing with inflation should continue to be \nsupported by an efficient liquidity management of government finances \ngiven the latter’s role and size (at 70%) in our domestic economy. Efficient \nliquidity management is critical to support the smooth execution of the \ngovernment’s budget even in times of fiscal consolidation or fiscal surplus, \nnot least because most of the suppliers to government are not borrowed \nentities. \n \n165. A stable exchange rate is critical in reducing the exchange rate pass-through \nonto domestic prices which is inherently high in dual currency economies. \nThe Bank will thus focus on smoothening exchange rate shocks through \nregular foreign currency sales to banks from the surrender portion of foreign \nexchange receipts in the outlook period, taking advantage of the reduced \nforeign currency demand on the auction system from averages of about \n74 \n \nUS$45 million per week at its peak to current levels of below US$20 million \nper week. \n \n166. The Bank will continue its tight monetary policy stance in sync with \nexpected average inflation to sustain the current stability of inflation and \nexchange rates. The moderation in interest rates is important and \nnecessitated by the downward trend in the month-on-month inflation since \nthe last quarter of 2022, which saw monthly inflation falling from 12.4% in \nAugust 2022 to 2.4% in December 2022. The Bank expects the downward \ntrend in inflation to continue into 2023 as evidenced by the 1.1% reduction \nin monthly inflation in January 2023. \n \n167. In view of the above developments and monetary policy measures that were \nunanimously agreed on by the Monetary Policy Committee (MPC), the Bank \noutlines the following specific monetary measures: \n \ni. \nInterest rates \n168. Consistent with the current and expected inflation outturn, the Bank will, \nwith effect from 1 February 2023, review the policy rates as follows: \ni. \nReducing the Bank policy rate from 200% per annum to 150% per \nannum; \nii. \nReducing \nthe \nlending \nrate \non \nthe \nMedium-term \nBank \nAccommodation Facility for the productive sectors of the economy \n(including individuals and MSMEs) from 100% per annum to 75% \nper annum; \niii. \nMaintaining the prevailing Bank policy rates as the minimum \nlending rates for all banks; \n75 \n \niv. \nAdjusting the minimum deposit interest rates on savings and time \ndeposits to 30% and 50% per annum, respectively; and \nv. \nMaintaining the minimum deposit interest rate on savings and time \nFCA deposits at 1% and 2.5% per annum, respectively. \n \nii. \nStandardising statutory reserves \n169. Statutory reserve requirements are an important part of the Bank’s tight \nmonetary policy stance as they impose liquidity buffers on financial \ninstitutions and increase the banking sector’s resilience against systemic \nrisks. In this regard, the Bank will, with effect from 1 February 2023, \nstandardise statutory reserve requirements on domestic currency and foreign \ncurrency deposits as follows: \ni. \nForeign currency demand and call deposits, 10%; \nii. \nForeign currency time and savings deposits, 5%; \niii. \nDomestic currency demand and call deposits, 10%; and \niv. \nDomestic currency time deposits, 5%. \n \n170. The statutory reserve ratios will be reviewed by the MPC from time to time \ndepending on the market liquidity conditions to keep credit expansion under \ncheck. \n \niii. \nGold coins \n171. The use of gold coins as an open market instrument for managing liquidity \nwill continue as part of the Bank’s sterilisation interventions to achieve a \nstable exchange rate. The Bank has no plans to withdraw the gold coins in \nthe short and medium term until such a time when stability starts to create a \nhigh appetite for business and consumers to hold domestic currency-\n76 \n \ndenominated assets. As such, the issuance of both higher and smaller \ndenominations of gold coins will continue as an open-market operation \n(OMO) instrument and investment instrument for value preservation. \n \n \n77 \n \n \niv. \nFurther liberalisation of the foreign exchange market \n172. The foreign currency auction system remains a critical part of the foreign \ncurrency market for the economy under the dual currency system and will \ncontinue to operate alongside the willing-buyer willing-seller (WBWS) \nmarket. The limit for the WBWS will remain at US$100,000 per entity in \nline with the Foreign Exchange Auction System limits for secondary users. \n \n173. As part of its foreign currency liberalization process, the Bank will support \nthe WBWS foreign currency trading system by availing foreign currency to \nbanks and Bureaux de Change from the surrender portion of foreign \nexchange receipts. The foreign currency will be sold to banks and Bureaux \nde Change through auction on a wholesale basis. The WBWS and the \nauction system will, thus, continue to complement each other with the \nWBWS acting as the interbank exchange rate, while the auction system \ncontinues as a foreign currency re-distribution mechanism to gauge foreign \ncurrency demand in the economy. The interbank exchange rate will continue \nto be based on the WBWS with traders and bureaus de change allowed a +/- \n10% margin from the interbank exchange rate in line with Government \npolicy. \n \nv. \nIncreasing and standardising export retention \n174. The foreign currency retention thresholds on exports and domestic FCAs are \nkey to influencing export earnings and the build-up of foreign currency \nreserves for the country. The Bank always strives to set the thresholds at \nlevels that strike a balance between the promotion of production of exports \nand export earnings, and the accumulation of foreign reserves. \n \n78 \n \n175. Given these two objectives, export retention shall be increased and \nstandardised at a level of 75% across all sectors of the economy, including \nfirms listed on the Victoria Falls Stock Exchange (VFEX), with effect from \n1 February 2023. Given this positive development, the incremental export \nincentive scheme is suspended for ease of administration. \n \n \nvi. \nIncreasing and standardising foreign exchange on domestic sales \nin foreign currency \n \n176. With a view to further liberalising the foreign exchange market and reducing \ndemand for foreign currency on the auction system and interbank market, \nthe foreign exchange retention on domestic sales in foreign currency will be \nreviewed upwards to 85%, with effect from 1 February 2022. \n \n177. This requirement shall apply to all foreign exchange deposits from domestic \nsales of goods and services, with the exception of deposits in respect of fuel \nsales, NGOs funds, free funds, and government funded projects and \nprogrammes. \n \nvii. \nExport of foreign currency cash and gold coins \n178. In order to align Zimbabwean policies with regional and best practice, the \nmaximum amount of foreign currency cash and gold coins that may be taken \nout of Zimbabwe on person or in the baggage of a person who is leaving \nZimbabwe has been reviewed from US$5,000 or its equivalent in any other \ncurrency or combination of currencies, to US$10,000 or its equivalent in any \nother currency or combination of currencies. The relevant statutory \n79 \n \ninstrument to repeal Section 2 (c) of Statutory Instrument 57 of 2022, will \nbe gazetted in due course to give effect to this policy review. \n \nviii. \nExport of local banknotes \n179. The maximum amount of Zimbabwean currency notes and coins that may \nbe taken out of Zimbabwe on person or in the baggage of a person leaving \nZimbabwe has been reviewed from twenty thousand Zimbabwean dollars to \nan equivalent of one thousand United States dollars, at the prevailing \ninterbank exchange rate. The relevant statutory instrument to repeal Section \n2 (b) of Statutory Instrument 57 of 2022, will be gazetted in due course to \ngive effect to this policy review. \n \nix. \nExport of demonetized and old banknotes \n180. Demonetised bank notes are notes taken out of circulation by the Bank in \naccordance with Section 41(2) of the Reserve Bank Act [Chapter 22:15]. \nSince some old and demonetised banknotes may be valuable as collector \nitems, the limit on export of old notes that may be taken out of Zimbabwe \non person or in the baggage of a person leaving the country has been limited \nto not more than 100 pieces of each denomination. \n \nx. \nTreatment of overdue export proceeds \n181. In line with the provisions of the Exchange Control Act [Chapter 22:05], \nexporters are under a legal obligation to repatriate the foreign proceeds from \nexported goods and/or services. The non-repatriation or partial repatriation \nof export proceeds is a punishable offence and the Bank will impose or \ninitiate various punitive measures against non-compliant or defaulting \nexporters. \n80 \n \n \n182. In order to incentivise exporters with overdue export receipts to repatriate \nthe export proceeds, exporters in this category shall, with immediate effect, \nbe entitled to retain 50% of their export receipts and liquidate the balance \ninto local currency at the prevailing WBWS exchange rate. \n \n \n \nxi. \nCompliance with minimum capital requirements \n \n183. The current minimum capital requirements for all categories of banking \ninstitutions and microfinance institutions will be maintained. Recognising \nthat the non-compliant institutions are at various stages in implementing \ntheir recapitalisation initiatives, the Bank will extend the compliance \ndeadline to 31 December 2023 to allow for the completion of the \nrecapitalisation processes currently underway. \n \n184. In this regard, no banking institution or microfinance institution whose core \ncapital is non-compliant with the prescribed minimum capital requirements \nshall pay dividends to its shareholders unless it has taken adequate steps to \ncomply with prudential requirements, including capital adequacy and has \nbeen granted approval by the Bank. \n \nxii. \nForeign currency exposure limits \n185. The single currency and the overall foreign exchange risk exposure limits \nshall be maintained at 10% and 20% of net capital base, respectively. As \nprescribed in paragraphs 28 and 29 of the Third Schedule of the Banking \nRegulations S. I. 205 of 2000, reviews would be done on a case-by-case \nbasis, depending on a bank’s specific requirements. \n \n81 \n \nSECTION SEVEN \nOUTLOOK AND FORWARD GUIDANCE ON INTEREST RATES \n \nInflation Outlook \n186. The tight monetary policy stance implemented by the Bank since the second \nhalf of 2022 has anchored inflation expectations in the economy. As such, \ndespite the heightened risks of global inflation in the outlook period, the \npolicy scenario envisages low domestic inflation pressures with average \nblended month-on-month inflation of below 1.5% in 2023. In line with \nstable monthly blended inflation, annual inflation is expected to \nprogressively decline to close the year in the range of 10-30%. \n \n187. The blended inflation is the most appropriate inflation for the Zimbabwean \neconomy in view of the increased use of foreign currency in domestic \ntransactions within the economy and the high levels of foreign exchange \ndeposits and loans in the banking sector of around 65%. Therefore, and as \nwas unanimously agreed by MPC, it is essential and logical that the blended \nrate of inflation should be the reference rate of inflation in Zimbabwe. It is \nparamount that ZimStat should consider publishing the blended rate of \ninflation and the USD inflation rate in Zimbabwe for better policy guidance \nin the economy. \n \n188. Figure 32 shows the forecast inflation path for 2023 considering alternative \nscenarios on month-on-month inflation outturns. \n \n \n82 \n \nFigure 32: Blended Inflation Outlook Under Alternative Scenarios of \nMonth-on-Month Inflations Outturns \n \nSource: RBZ \n \n189. The declining annual inflation projection path for 2023 is underpinned by \nthe following broad assumptions: \na) Continued tight monetary policy stance, with interest rates aligned to the \nexpected inflation path; \nb) Strong fiscal stance including insistence on value for money in all \ngovernment contracts and procurement systems; \nc) Strong coordination between fiscal and monetary authorities on liquidity \nmanagement; \nd) Continued use of the dual currency system; and \ne) Normal to above normal rainfall which will dampen food prices. \n \nForward Guidance on Interest Rates \n190. Consistent with the expected downward trend in inflation since the last \nquarter of 2022, the Bank through the MPC will periodically review the \n18.2%\n12.68%\n28.3%\n0%\n20%\n40%\n60%\n80%\n100%\n120%\nJan-22\nFeb-22\nMar-22\nApr-22\nMay-22\nJun-22\nJul-22\nAug-22\nSep-22\nOct-22\nNov-22\nDec-22\nJan-23\nFeb-23\nMar-23\nApr-23\nMay-23\nJun-23\nJul-23\nAug-23\nSep-23\nOct-23\nNov-23\nDec-23\nMonth on Month 1.4%\nMonth on Month 1%\nMonth on Month 3%\n83 \n \nBank policy rates in sync with the expected inflation profile. The interest \nrates on local currency deposits and loans will be guided by the implied \nexpected average annual inflation on the domestic currency. \n \n191. Taking into consideration the implied month-on-month ZWL inflation for \n2023, interest rates on local currency borrowings would fall between 40-\n60% by the end December 2023, as shown in Figure 33. \n \n Figure 33:Implied Interest Rate Path January-December 2023 \n \n \n192. The envisaged inflation and interest rate profile will support a stable \nexchange rate path which is expected to move in line with monthly inflation \ndifferentials between Zimbabwe and its trading partners. \n \n0%\n10%\n20%\n30%\n40%\n50%\n60%\n70%\n80%\nJan\nFeb\nMar\nApr\nMay\nJun\nJul\nAug\nSep\nOct\nNov\nDec\nExpected average Y-O-Y Inflation\nImplied Interest Rate\n84 \n \nSECTION EIGHT \nCONCLUSION \n \n193. The Bank expects the domestic economic outlook to remain positive \nnotwithstanding uncertainties around the global economic outlook. Against \nthis backdrop, the Bank shall remain committed to staying on course of a \ntight monetary policy stance aligned to the inflation path to balance the need \nto protect price stability and the country’s growth potential. In this context, \nthe policy measures in this Statement are expected to support and sustain the \ncurrent macroeconomic stability and economic resilience to global and \ndomestic shocks. \n \n194. Going forward, the Bank and the MPC will remain resolute and alert to \nglobal and domestic headwinds to proactively deal with any emerging \ndomestic inflation pressures in the near and medium term to ensure that the \ncurrent stability is sustained. \n \n195. I, therefore, call upon all stakeholders to continue observing good business \nethics and pricing models to complement the Bank’s efforts to sustain price \nand financial system stability which is critical for sustained and inclusive \neconomic growth and development. \n \n \n \nI THANK YOU \nJOHN PANONETSA MAN\nGOVERNOR\nGUDYA\n \nR\nE\nS\nE\nR\nV\nE\nB\nA\nN\nK\nO\nF\nZ\nI\nM\nB\nA\nB\nW\nE\nReserve Bank of Zimbabwe \n4BNPSBMachel Avenue\nBox 1283)BSBSF\n;JNCBCXF \n Tel: \t\n\n \nEmail: info@rbz.co.zw \nReserve Bank of Zimbabwe \n-FPQPME5BLBXJSB\nBox 399 Bulawayo, Zimbabwe \nTel: \n\nEmail: info@rbz.co.zw", "source": "RBZ", "stratum": "cb_requests", "fetch_date": "2026-05-11", "url": "file:///RBZ/Monetary_Policy_Statements/MPS_February_2023Zim.pdf"}
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