ZIMBABWE’S annual broad money supply growth slowed down to 11,97 percent in December 2014, from 15,98 percent in November, as the economy continued to grapple with a chronic liquidity crunch, according to the Reserve Bank of Zimbabwe (RBZ).In its monthly report for December, the RBZ said in absolute terms, broad money supply (M3) rose from US$3,9 billion in December 2013 to US$4,4 billion in December 2014.
Money supply is the total supply of money in circulation in a given country’s economy at a given time.
“Over the same period, on the assets side, growth in M3 was driven by increases of both net foreign assets (NFA) and net domestic assets of 10,23 percent and 8,18 percent, respectively,” said RBZ.
Zimbabwe’s improved tobacco sales last year spurred broad money supply growth. Treasury bill issuances however registered a 141,81 percent annual growth, resulting in net credit to government increasing by 44,03 percent. The increase in Treasury bill issuances partly reflected the slowdown in government revenue collections as a result of the economic downturn.
Revenue collections by the Zimbabwe Revenue Authority (Zimra) for the year to December 2014 amounted to US$3,84 billion, against a target of US$3,82 billion largely supported by collections from individual tax, value added tax, excise duty and corporate income tax.
According to Zimra’s revenue performance report for the year ended December 2014, revenues were suppressed by liquidity challenges, company closures and scaling down of operations. ZIMRA commissioner general, Gershem Pasi said the economy was characterised by low economic activity in 2014 but overall, the revenue target for the year was maintained at US$3,82 billion.
Net collections for the year were down six percent to US$3,60 billion against a target of US$3,82 billion, with fourth quarter net collections at US$996,94 million against a target of US$1,11 billion. RBZ said the annual increase in domestic credit was mainly underpinned by a 44,03 percent increase in net credit to government. Credit to the private sector registered a growth of 4,01 percent.
Net credit to government continued to be driven by Treasury bill issuances. The report said growth in credit to the productive sectors of the economy continued on an upward trend, reaching 4,01 percent in December, the highest annual growth in 2014. On a monthly basis, however, credit to the private sector declined by 0,72 percent, from US$3,8 billion in November to US$3,7 billion in December last year.
The credit advanced to the private sector was mainly utilised for working capital (74,85 percent), procurement of consumer durables (11,17 percent) and other purchases (9,98 percent). Loans and advances utilised for fixed investment activity remained low, with the procurement of plant and equipment accounting for only four percent of total loans and advances.