RBZ upholds tight monetary policy to protect ZWG

The Reserve Bank of Zimbabwe (RBZ) on Thursday reaffirmed its tight monetary policy stance as a key strategy to conserve the local currency, despite mounting pressure from industry players to ease borrowing costs.

Delivering the Mid-Term Monetary Policy Statement (MPS) under the theme "Walking The Talk And Staying The Course," RBZ Governor Dr John Mushayavanhu highlighted the central bank's success in maintaining exchange rate stability, which has garnered widespread acclaim.

The RBZ projected inflation to close the year at around 30%, aiming to sustain a positive real interest rate of 5%. Accordingly, the bank kept the policy rate steady at 35%, even as critics argue that such a high rate restricts access to affordable capital, stifling productivity in key sectors.

While acknowledging the challenges, the RBZ defended the high rates as necessary to curb speculative borrowing that could undermine economic stability.

On banking fees, the MPS reiterated earlier measures from February 2025 that exempt accounts holding balances below US$100 (or equivalent in Zimbabwe Gold currency, ZiG) from bank charges. Furthermore, Point of Sale (POS) transactions under US$5 (or equivalent in ZiG) are also exempt from transaction fees by banks and Payment System Providers (PSPs).

Despite these steps, the policy falls short of addressing persistent complaints from the public and corporates who bear steep costs—reportedly losing about US$3 for every US$100 withdrawn—thereby inflating business operating expenses.

Regarding statutory reserve requirements, the MPS maintained ratios between 15% and 30%, depending on deposit types. It encouraged banks to attract more long-term deposits to reduce effective reserve requirements toward the lower threshold.

"The statutory reserve ratios remain unchanged and will be reviewed when appropriate and consistent with the monetary policy thrust," the statement said, despite concerns from the banking sector that high reserves are constraining funds available for productive lending.

The export surrender threshold was also held steady at 30%, with no direct response to exporters' grievances over delayed payments in Zimbabwe Gold currency (ZWG). Analysts interpret this as a deliberate effort to protect the fragile local currency by restricting ZWG outflows.

Market observers note that the cautious approach to export payments and the retention of strict monetary controls signal ongoing fragility within the Zimbabwean currency system.

Although the statement touched on the controversial prospect of a single currency by 2030, Dr Mushayavanhu's MPS refrained from revealing a concrete roadmap. Instead, it assured that the de-dollarisation strategy will be formalised within the National Development Strategy II (NDS2).

"The Reserve Bank, chairing the NDS2 Thematic Working Group on Macroeconomic Stability and Financial Deepening (MESFIND), is currently engaged in consultations on the issue," the MPS said.

"The roadmap will encapsulate the need to maintain current stability, preserve foreign currency accounts, and safeguard existing USD-denominated contracts. Considerations will be made to ensure business continuity and certainty," it added.

As Zimbabwe navigates its complex economic terrain, the RBZ's firm monetary stance underscores its priority of currency preservation, even as calls grow louder for reforms to ease financial pressures on businesses and consumers alike.