Zimbabwe banks to offer cheaper, long-term loans

Zimbabwe could soon see cheaper borrowing costs and longer loan repayment periods as the Government moves to take advantage of the country's sharp decline in inflation, Finance, Economic Development and Investment Promotion Minister Professor Mthuli Ncube has said.

In an interview, Prof Ncube said inflation had fallen to a historic 2.9 percent, creating room for interest rates to decline further and enabling banks to provide longer-term financing to businesses and individuals.

He said the Government was accelerating efforts to develop a 15-year yield curve, which would provide a benchmark for pricing loans and investments over longer periods.

"It means now our interest rates can come down sustainably," Prof Ncube said.

"We can reduce the cost of capital over time going forward and increase lending to the private sector, to citizens and just in promoting investment in general. This is not a small issue."

Zimbabwe's benchmark policy rate currently stands at 30 percent, following the Reserve Bank of Zimbabwe's decision to cut it from 35 percent in June. However, commercial lending rates remain significantly higher, ranging between about 43.95 percent and 46.54 percent.

Prof Ncube said the development of a reliable long-term yield curve would give banks greater confidence to price loans extending over several years.

"It also means that now companies can borrow long-term. Because once inflation is low and predictable going forward, you can borrow long-term," he said.

"Banks don't worry about whether they lose money or not in terms of pricing because they can price along a proper yield curve."

A yield curve shows the cost of borrowing money across different time periods and helps lenders and investors determine appropriate interest rates for financing ranging from one year to as much as 15 years.

Prof Ncube said he had instructed officials in the Ministry's Public Debt Department to accelerate work on the 15-year benchmark.

"I was just speaking to our staff from the Debt Department to say we must speed up the development of this yield curve that goes into 15 years going forward," he said.

"And they are working on that."

The move could have significant implications for businesses and productive sectors of the economy, particularly those requiring substantial capital investment.

Factories, mines, power projects, irrigation schemes, housing developments and large-scale agricultural projects typically require years to generate returns. Access to longer-term financing would allow investors to spread repayment costs over a longer period instead of relying on expensive short-term loans that must frequently be refinanced.

Cheaper credit could also enable businesses to purchase machinery, expand production and potentially create more employment, while farmers and other productive sectors could benefit from financing structured around longer repayment periods.

The Government's push comes after a dramatic improvement in Zimbabwe's inflation environment.

The country experienced severe price instability in recent years as currency volatility and high inflation made it difficult for businesses to plan and for financial institutions to accurately price long-term loans.

Inflation remained exceptionally high through 2023 and 2024 before beginning to moderate following tighter fiscal and monetary policies and efforts to stabilise the currency.

By July 2026, year-on-year inflation had fallen to 2.9 percent, representing a major turnaround from the triple-digit inflation environment that had previously constrained economic activity.

Low and predictable inflation provides businesses with greater certainty when forecasting costs, revenues and future debt repayments, while giving banks greater confidence in extending credit over longer periods.

However, the gap between inflation and commercial lending rates remains substantial, with businesses still facing borrowing costs in the mid-40 percent range.

Meanwhile, the Government is seeking to leverage the improved macroeconomic environment to attract more investment into Zimbabwe.

The World Bank recently removed Zimbabwe from its classification of fragile countries, a development the Government believes could improve international perceptions of the country and reduce the risk premium associated with investment.

Prof Ncube said the improved country-risk profile, coupled with greater macroeconomic stability, was strengthening Zimbabwe's investment proposition.

"This means a lot for Zimbabwe in the sense that now investors can confidently see Zimbabwe in different light — a country that is free of fragility, institutional fragility," he said.

The Government is targeting both foreign direct investment and portfolio investment, including increased participation in the country's capital markets.

"We are attracting very good investment going forward, both foreign direct investment as well as investment into our capital market — Zimbabwe Stock Exchange, Victoria Falls Stock Exchange. It is showing in the levels of performance of those two stock exchanges," Prof Ncube said.