ZIMBABWE’S savings rate has declined sharply, from 26% of the Gross Domestic Product (GDP) in 2019 to about 17% last year, Reserve Bank of Zimbabwe (RBZ) deputy governor Innocent Matshe has revealed.
This decline in savings has significant implications for the nation's economic growth and development, highlighting the need for urgent policy interventions.
“Economic growth is critical for boosting disposable income which in turn promotes a greater level of savings depending on the propensity to save,” Matshe said while speaking at a panel discussion during the 10th CEO Africa Round Table annual conference in Victoria Falls last week.
"Since 2021, (after the Covid shock) the Zimbabwean economy has been experiencing sustained growth of over 5% per year. The pattern of growth indicates a sustained level of investment in economic activity driven by thin savings. Inflationary conditions yesteryear dampened the propensity to save.
“The nation’s savings (rate) have been declining, averaging 17% of GDP over the last five years. The RBZ has taken cognisance of the declining trend and the need to promote certainty, predictability, and value preservation.”
He noted that the savings culture was eroded by inflationary pressures as it impacted the disposable incomes of Zimbabweans.
Matshe said the smooth transition from Zimbabwe dollar to Zimbabwe Gold without perceived or real loss of value to the public, was expected to further boost economic growth and promote a savings culture in the country.
Speaking at the same panel, TN Holdings group chief executive, Tawanda Nyambirai said the banking sector needs to reconfigure itself.
- Zim’s savings rate slumps to 17% of GDP
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“The banking sector in Zimbabwe is facing challenges, with banks no longer being trusted to handle compliance issues or provide advisory services or people’s savings," he said.
“They are merely facilitating transactions and charging fees, leading to a loss of confidence in their abilities. As a result, people are seeking alternative investment options, displacing the traditional role of banks.
“It is time to rethink the relationship between economic growth and savings in banking institutions, as people are finding other ways to invest. I think the question here is, is the banking sector still relevant in Zimbabwe?”
Matshe, however, declined to comment on whether the banks were still relevant in Zimbabwe or not.
“I will not answer the question that you have posed to me just now on whether the banks are still useful. I will not answer that but I will let you decide whether they are useful or not after I present my presentation just now,” Matshe said.
“The RBZ is ready for the AfCFTA [African Continental Free Trade Area] and a stable economy will ensure our successful participation in the AfCFTA.
“The other thing is that Zimbabwe is a signatory and participant of the Pan-African payment and settlement system, which facilitates instant payments and settlements between countries, so all your companies can participate through that platform that the central bank is part of.”
He noted that the central bank was advancing research on the Central Bank Digital Currency (CBDC) to enhance the traceability of financial flows and to facilitate fast or instant cross-border and retail payments, which is necessary for the trade bloc.
“The future of banking lies in digitalisation, and the RBZ is developing a central bank digital currency to future-proof financial services, increase financial inclusion, and facilitate social grants. The bank, like other central banks worldwide, continues to advance research and development work on the CBDC,” he said.
“The reason is to complement fiat and other payment systems, to future-proof economic activity, to increase financial inclusion, and to facilitate the reach of accounting for social grant payments.
“Moreover, the other reasons are to enhance the traceability of financial flows and to facilitate fast/instant cross-border and retail payments depending on the type and the architecture of the CBDC adopted.”
He also noted that financial inclusion was necessary to enhance national savings by bringing a large portion of the population into the financial sector.
