Reserve Bank of Zimbabwe governor Dr John Mangudya has clarified on the issue of the national reserve balance while also shedding light on other areas of the economy in a wide-ranging interview with 263times.
Speaking to our reporter, Violet Chimbaka, who had asked him on the reported growth of the national reserve balance, Dr Mangudya said that it hadn’t changed but what had increased were the US dollar balances in the banking sector.
”I think people are confusing reserves and foreign exchange balances at the commercial banks that are around US$1.1 billion. These balances increase liquidity in the banking sector and the country at large, but are not called net international reserves.” Dr Mangudya said.
He added that the significant increase in the foreign exchange balances at banks shows an increase in confidence in the economy.
He went further and stated that the Central Bank is targeting to have a net international reserves of import cover by 2022.
”Our target is to have a net international reserves of 3months import cover by 2022 and to 6 months by 2025 in line with the aspirations of the national Development Program,
”We also expect the foreign exchange balances at banks to continue to increase in order to close the year at above US$1,5 billion.” He said.
The Net international reserve balance refers to Foreign exchange reserves that central a bank can hold in foreign currencies, and they include banknotes, bank deposits, bonds, treasury bills, and other government securities.
Asked if the increased foreign exchange balances weren’t a reflection of loss of confidence in the local currency, the governor said that assumption is incorrect adding that the increase in US dollar balances was a reflection of confidence in the economy.
” No not at all, the demand for the local currency has gone up significantly. All purchases of forex from the auction system is done using the local currency and weekly accounts keeping on increasing.” he stated.
Asked on the reported pending introduction of $50 zimbabwean dollar notes into the economy and whether the move wouldn’t cause a spike in inflation, the governor said the bigger notes are coming soon and they will not cause inflation as people are thinking.
”The bigger notes do not increase inflation because people will not be getting money for free but withdrawal from their accounts.” The Governor said.
On the question of when the new notes would be released, Dr Mangudya did not give an actual date save to say that as advised in the Monetary Police Statement, the ZW$50 bank notes would be coming soon.
