Business leaders exert pressure on RBZ

CLOUDINE MATOLA

Zimbabwe’s most influential captains of industry and commerce this week engaged Reserve Bank of Zimbabwe (RBZ) Governor Dr John Mushayavanhu ahead of the 2026 Monetary Policy Statement (MPS), expected later this month, as the central bank faces mounting pressure to strike a delicate balance between sustaining tight policy to control inflation and fostering economic growth.

Executives are pressing for improved liquidity, manageable interest rates — currently hovering around 35% — and higher foreign currency retention thresholds.

Business Times, a market leader in business, financial and economic reportage, can report that business leaders voiced deep concern over the liquidity squeeze resulting from the central bank’s tight monetary stance. They said the prevailing conditions have left companies struggling to meet financial obligations and maintain operational efficiency, urging the apex bank to act swiftly to avert further disruptions.

While annual ZiG inflation has eased to 4.1% in January, down from 15% in December 2025, and US dollar inflation has also slowed significantly to 1% from 12% over the same period, business leaders argued that policy calibration remains critical. They want restrictive measures that preserve local currency stability, but without over-tightening conditions to the point of choking productive capacity.

The business community is calling for reduced interest rates — targeting a potential 20% by mid-2025, alongside enhanced liquidity to ease persistent cash shortages.

During a high-level meeting with Dr Mushayavanhu and his executive team, chief executives under the CEO Africa Roundtable, led by board chairman Oswell Binha and CEO Kipson Gundani, delivered what they described as a candid and technically grounded assessment of Zimbabwe’s macroeconomic position.

The business leaders argued that: “Zimbabwe’s present macroeconomic stability is best understood as exchange-rate anchored stability under a de facto multicurrency regime, rather than endogenous monetary strength.

“Price stability and transactional predictability are currently sustained by currency substitution and USD anchoring.

“However, persistent policy signaling toward accelerated depolarization introduces forward-looking currency risk, encouraging defensive dollarisation and precautionary portfolio behaviour. The central policy imperative is therefore to preserve the multicurrency framework as a transitional nominal anchor while credibility in domestic monetary instruments is rebuilt.”

The CEOs warned that premature depolarisation signaling is acting as a catalyst for further currency substitution and defensive portfolio reallocation.

They said: “Market sensitivity to currency regime shifts remains acute due to historical episodes of savings erosion, exchange losses, policy reversals. Even implicit dollarization timelines or administrative nudges generate increased velocity of US dollar circulation, reduced local currency demand, shortened asset duration preferences and defensive balance sheet positioning by firms and households.”

The CEOs observed that Zimbabwe’s macro-structure increasingly reflects a progressively informalised and cash-intensive economic architecture.

“This is characterised by high currency in circulation outside the banking system, weak deposit mobilisation, externalized savings and parallel pricing frameworks.”

They further argued that current policy incidence is disproportionately borne by the compliant formal sector:

“Current policy incidence is disproportionately borne by the compliant formal sector through elevated effective tax rates, transaction costs, regulatory overheads.

“This asymmetry produces rational migration toward informality, contraction of the formal tax base, weakening of monetary policy transmission.”

The business leaders cautioned that without structural incentives for formalisation, the economy risks permanent dualisation — a formal sector burdened by compliance and an expanding informal sector operating outside policy transmission channels.

The CEOs also raised concerns over foreign currency surrender requirements, quasi-fiscal dependence and what they termed a credibility constraint.

They noted that while surrender requirements were historically justified as a reserve accumulation mechanism, they are increasingly perceived as quasi-fiscal instruments.

“The challenge is where surrendered proceeds are not honoured immediately, the mechanism becomes a coercive liquidity extraction tool, exporters experience implicit taxation and balance sheet strain, externalization and under-invoicing incentives intensify.

“In an integrated policy position where the State lacks the capacity to honour surrendered proceeds on call, continued remittance of the surrender portion should not be expected.”

The CEOs further highlighted that Zimbabwe’s sovereign debt burden remains a binding constraint on monetary policy flexibility. They warned that the prevailing interest rate environment has rendered formal credit largely unviable for productive sector expansion.

“Consequences include fiscal–monetary policy incoherence risk and macroeconomic signaling failures. Durable stability requires tight congruence between policy stance and private sector behaviour. Zimbabwe’s macroeconomic architecture demands synchronized policy signaling to sustain credibility.”

In outlining a pathway from fragile to durable stability, the CEOs emphasised the need for structured reforms.

They said strategic imperatives include:

“Preserve multicurrency functionality as the operative nominal anchor, eliminate coercive or implied dedollarisation timelines, address structural informalisation through incentive-based formalisation, rebalance the tax burden to broaden the base and restore neutrality.”

The business leaders also advised the RBZ to re-anchor surrender requirements to strict credibility.

“Honour on call or suspend the mechanism. Implement a credible sovereign debt management pathway and reduce real cost of productive capital through structured financing windows.”

They further called for reinforcement of central bank independence and advisory authority, as well as deeper, structured State–industry monetary dialogue.

In a warning, the CEOs stressed: “Stability without credibility is transitory. Zimbabwe’s present stability is externally anchored and confidence-sensitive.

“Without coherent policy signaling, institutional credibility, and disciplined macro-management, it remains reversible. The strategic objective must be to transition from administratively supported stability to credibility-driven stability to productivity-anchored growth. Only then can the economy move from fragile equilibrium to durable macroeconomic resilience.”

Separately, a Zimbabwe National Chamber of Commerce (ZNCC) delegation led by president Tapiwa Karoro and chief executive Christopher Mugaga also engaged the RBZ Governor this week.

Their submissions centred on key policy issues affecting business viability and financial sector stability, including the tight monetary policy stance, elevated real interest rates and prevailing credit conditions, the performance of the ZiG in the market, and the implications of digital taxation.