RBZ blames liquidity crunch on hoarding of US dollars

The Reserve Bank of Zimbabwe (RBZ) has attributed the ongoing liquidity crunch in the economy to the hoarding of United States dollars, dismissing claims that the shortage is linked to limited supply of the Zimbabwe Gold (ZiG) currency.

Zimbabwe introduced the ZiG currency in April last year, marking the sixth attempt to revive a domestic currency after the collapse of the Zimbabwean dollar in 2009, which led to widespread dollarisation. Since then, the RBZ has implemented stringent monetary policies aimed at protecting the ZiG, but these have contributed to a severe liquidity crunch and deflationary pressures in the economy.

These measures intentionally keep the circulation of ZiG below market demand to preserve its value. However, a side effect has been the inability of banks to fully meet foreign currency demands. Justice, Legal, and Parliamentary Affairs Minister Ziyambi Ziyambi recently informed Parliament that local banks could only supply US$10 million against a requested US$25 million in foreign exchange.

Speaking on the sidelines of the recently concluded European Union–Zimbabwe Business Forum in Harare, RBZ Deputy Governor Innocent Matshe insisted that the problem was not a shortage of ZiG but rather a reluctance among holders of US dollars to exchange their currency for ZiG.

"What people are talking about is not ZiG, it's people who don't want to unwind their positions," Matshe said. "It's people who have changed into US dollars, now they need the ZiG. They don't want to hand over the US dollars in order to get the ZiG."

He explained that the central bank's approach was to carefully increase ZiG supply in line with market demand rather than flooding the market indiscriminately.

"Since October, every single day, the market has been loaned about ZiG1.3 billion to ZiG1.5 billion, so there is money in the market," Matshe said. "Where is money going? Sure, there are people with different agendas; that's why you see the shortage."

Sibongile Moyo, the newly appointed president of the Bankers Association of Zimbabwe, added that Zimbabwe's total bank deposits stood at the equivalent of about US$3.35 billion as of March 2025, with ZiG deposits representing 15.95% of total deposits.

She noted that low disposable incomes and a general preference for holding cash rather than saving had contributed to low deposit levels in the banking system.

"The best way to solve these issues is to improve deposit levels through economic development and rebuilding trust and confidence within the system," Moyo said. "Economic growth will increase disposable incomes to allow savings by offering attractive interest rates for savings deposits as well as rebuilding trust in banking and savings."

Moyo further highlighted the country's urgent need for substantial long-term offshore credit to fund major projects in energy, infrastructure, and mining  -  a challenge complicated by Zimbabwe's sovereign debt burden.

"The country needs billions of United States dollars in long-term and affordable offshore lines of credit to finance large-scale projects," she said. "These large amounts have been difficult to source because of the sovereign debt overhang and country risk linked to that."

She clarified that while some local banks with foreign shareholders have been able to provide hundreds of millions in offshore credit through their parent institutions, much of the offshore credit reported in the media involves third-party financial institutions not directly connected to Zimbabwean banks.

As Zimbabwe continues to navigate these economic challenges, the RBZ maintains that stabilizing the ZiG and encouraging currency exchange are key to addressing liquidity constraints and supporting growth.