Economists warn Zimbabwe's stability is 'artificial'

Leading economists and banking executives have warned that Zimbabwe's recent economic stability is being sustained through aggressive monetary controls that are squeezing liquidity, weakening businesses and masking deeper structural weaknesses in the economy.

The warnings come as the Reserve Bank of Zimbabwe (RBZ)
 continues to maintain a tight monetary policy stance introduced in 2024 to stabilise the exchange rate and curb inflation.

The measures have helped bring inflation down to 4,8 percent while stabilising the Zimbabwe Gold (ZiG) at around US$1:ZiG25. They also curtailed black-market currency trading that had once dominated the economy.

However, economists say the apparent calm is being achieved at a heavy cost to growth, investment and business survival.

Tony Hawkins, professor of economics at the University of Zimbabwe Graduate School of Management, warned that the economy remains fundamentally fragile.

"The system is fragile," Hawkins said. "It relies on strong positive external influences that are very volatile — commodity prices, including oil."

He argued that Zimbabwe remains highly uncompetitive after years of inflation, underinvestment and a sustained skills exodus that has hollowed out productive sectors.

"Policy ignores fundamentals: skills exodus, youth unemployment, collapse of state education and health infrastructure," he said.

Chenayimoyo Mutambasere said the current calm should be viewed as "managed stability" rather than genuine structural recovery.

"The relative exchange rate and inflation stability we have seen in recent months has been achieved primarily through tight monetary controls, restrictions on liquidity, high interest rates and foreign currency management measures by the Reserve Bank," she said.

"The economy also remains heavily dependent on commodity exports, diaspora remittances and the informal sector. These are not sufficiently stable foundations for long-term resilience."

Mutambasere pointed to government arrears of US$1,3 billion owed to domestic service providers as evidence that the stability narrative is contradicted by mounting fiscal pressures.

"This is contrary to the stability claims," she said.

Economists say businesses and consumers are increasingly feeling the strain of tight liquidity conditions, with high borrowing costs and restricted access to credit reducing spending and slowing economic activity.

Mutambasere warned that stability without growth risked creating long-term stagnation.

"Stability without growth can become economically stagnant. This is the Zimbabwean reality," she said.

She noted that small and medium enterprises are facing severe financing constraints, while retailers such as OK Zimbabwe
 are struggling amid weakening consumer demand.

Investment banker Nyasha Chasakara said that while macroeconomic indicators appear positive, businesses remain under severe pressure.

"Many businesses and households are still feeling a liquidity squeeze at the transaction level," he said.

"Customers are cautious. Sales cycles are longer. Even where prices are reduced, buyers are delaying decisions."

The International Monetary Fund projects Zimbabwe's economy will grow by 5 percent in 2026, with inflation forecast at 8 percent.

The IMF has also approved a 10-month Staff-Monitored Programme aimed at strengthening macroeconomic management and supporting Zimbabwe's re-engagement efforts with international creditors.

Meanwhile, the Zimbabwe Investment and Development Agency (ZIDA) says the country secured US$1,4 billion in investment commitments during the first quarter of 2026, with strong interest in energy and infrastructure projects.

Not all economists share the pessimistic outlook.

Tapiwa Mashakada argued that the current stability reflects meaningful gains achieved through disciplined policy management.

"A tight fiscal and monetary policy regime has resulted in low inflation, a stable local currency and a less volatile exchange rate," Mashakada said.

But leading bankers have also begun publicly warning about the side effects of prolonged policy tightening.

Pearson Gowero said the liquidity crunch had intensified pressure on key sectors of the economy.

"The retail and manufacturing sectors, in particular, operated below optimal capacity during the year, with several businesses entering corporate rescue as they navigated structural and liquidity challenges," he said.

James Prince Mutizwa warned that tight monetary conditions were creating funding challenges for financial institutions.

"The measures implemented by the monetary authorities also led to a significant liquidity crunch," he said.

Herbert Nkala said restrictive fiscal and monetary policies were limiting the banking sector's ability to support economic activity.

"Funding constraints continue to limit the industry's ability to carry out its financial intermediation role," he said.

FBC chief executive Trynos Kufazvinei added that high interest rates, reserve requirements and limited long-term funding were suppressing lending activity.

"The operating landscape is constrained by high interest rates, statutory reserve requirements and limited long-term funding," he said.

ZB Financial Holdings also acknowledged that monetary stability had come at a cost.

"While these measures supported currency stability, they also constrained credit growth, limiting the banks' lending capacity," the group said.

It further warned that foreign currency shortages, energy supply challenges and infrastructure deficits continued to threaten broader economic expansion.

Despite the concerns, Zimbabwe's economy recorded growth of 6,6 percent in 2025, while the exchange rate remained relatively stable and the parallel market premium narrowed significantly.

Responding to criticism, John Mushayavanhu defended the RBZ's approach, saying authorities were carefully balancing inflation control with economic growth.

"The Reserve Bank of Zimbabwe has been monitoring and carefully calibrating market liquidity to manage inflationary pressures without compromising economic growth prospects," he said.

He added that banks holding excess liquidity were reluctant to lend to institutions facing shortages, creating what he described as an "artificial liquidity shortage."

Analysts, however, warned that unless Zimbabwe addresses deeper structural challenges — including governance, infrastructure, industrial productivity and skills retention — the current stability may prove difficult to sustain.