The Reserve Bank of Zimbabwe delivered the 2023 Monetary Policy Statement amidst high expectations from the business community for concessions to be made on key issues. 2022 saw periods of resurging monetary instability as the exchange rate continued to deteriorate and global headwinds filtered into the domestic economy. As a result, the central bank doubled down on its contractionary measures to offset pressures with the main policy rate being raised to 200%. The tight monetary policy stance allowed the Bank to anchor inflation and exchange rate expectations as the economy responded ending the year in a disinflation trajectory. The Central Bank also reported that household spend in the CPI basket is now 76.56% skewed towards foreign currency transactions whilst expenditure in local currency constitutes the rest of spend. As such, blended inflation was adopted in the month of February as the new metric for measures price changes in the economy. Consequently, month on month inflation came in at -1.6% for the month of February 2023. Using the same new metric, annual inflation was reported to have moderated from 102% in January 2023 to 92% in the month under review owing to suspected price decreases of some commodities.
On the stock market, activity on the Zimbabwe Stock Exchange registered a marginal increase with market cap increasing by 2.91% from ZWL$2.40tn to ZWL$2.47tn over the month of February despite Axia and Innscor delisting from the bourse. However, in real terms, using an effective exchange rate the market cap slightly decreased by 7.02% as the local currency depreciated faster than the market cap recovery rate. The stock market closed the month of February at a market cap of US$2.19bn, trending below the 5-year average market cap of US$4bn. Average daily value traded for the month of February increased from an equivalent of US$0.39mn in January, up to US$0.82mn. Total volumes traded were also up 56% to 143.80mn. On the VFEX, the bourse witnessed the listing of Innscor Africa Limited and Axia Corporation. We have been observing capital appreciation of counters migrating from the ZSE due to exchange rate disparities. We are of the view this prevailing situation will be sustained at least in the short-term presenting an opportunity to register gains for companies moving from the ZSE onto the VFEX.
