Liquidity crisis a product of fertile imagination: RBZ

PHILLIMON MHLANGA

The Reserve Bank of Zimbabwe (RBZ) has dismissed claims that the economy is facing a liquidity crunch, describing such assertions as “a product of fertile imagination” even as businesses continue to report constrained access to credit under a tight monetary policy environment.

RBZ Deputy Governor Dr Innocent Matshe said concerns around liquidity squeeze were misplaced, insisting that the central bank has adequate instruments in place to support productive sectors while safeguarding macroeconomic stability.

He said the perception of liquidity shortages does not reflect the reality of the monetary system, arguing that targeted financing windows and structured liquidity support mechanisms remain active and accessible to qualifying productive sectors of the economy.

Dr Matshe added that the central bank has effectively doubled down on its Targeted Finance Facility (TFF), expanding the quantum of support available to agriculture, manufacturing, and other key value-generating sectors as part of its broader strategy to sustain economic growth without fuelling inflationary pressures.

He maintained that while liquidity may appear tight in speculative or non-productive segments of the market, the policy framework is deliberately designed to channel funding towards sectors that generate output, exports, and fiscal resilience.

The remarks come at a time when many businesses have voiced concern over limited access to affordable credit, with some firms citing delayed payments, tight banking conditions, and elevated borrowing costs as constraints on working capital.

However, the central bank has argued that stability-oriented monetary policy measures are necessary to anchor inflation expectations and protect the broader economy from volatility.

“It’s a product of fertile imagination — there is no liquidity crisis,” Matshe told Business Times on the sidelines of the Insurance and Pensions Symposium in Victoria Falls last week.

His comments come at a time when industry leaders have raised alarm over tightening credit conditions, arguing that elevated interest rates and stringent liquidity controls are stifling productive sector growth.

The central bank revealed it has doubled its TFF, availing ZiG1.2bn to productive sectors this year, a move positioned as a direct counter to claims of funding shortages.

“We have the TFF to cover productive sectors that may need financing, at rates lower than those offered by commercial banks and that facility has not been exhausted,” Matshe said.

“The Reserve Bank has extended the facility under the same terms and conditions and will avail an additional ZiG600m in 2026, bringing the total to ZiG1.2bn.”

The TFF, a cornerstone of RBZ’s intervention toolkit, is designed to channel affordable capital into key sectors such as agriculture, manufacturing and mining, sectors regarded as critical to sustaining Zimbabwe’s fragile recovery.

While dismissing the existence of a liquidity crisis, Matshe made it clear that the RBZ will continue aggressively managing money supply to prevent destabilising speculative activity.

“Excess market liquidity will be mopped up to ensure it does not find its way into the parallel market to fuel exchange rate volatility,” he said, adding that the central bank will deploy non-negotiable certificates of deposit (NNCDs) as a key sterilisation instrument.

This dual-track approach, injecting liquidity selectively while draining excess cash, underscores the RBZ’s delicate balancing act between supporting growth and defending currency stability.

The central bank’s stance is anchored in its hybrid monetary policy framework, which uses reserve money as the operational target and the exchange rate as the intermediate anchor. According to Dr Matshe, the recalibrated framework has helped restore a measure of stability after years of currency volatility and inflation shocks.

Recent data appears to support that claim. Zimbabwe’s inflation trajectory has undergone a dramatic reversal, with annual ZiG inflation plunging from 95.8% in July 2025 to 3.8% in February 2026 before edging slightly to 4.4% in March. Matshe described this as unprecedented in the past three decades, pointing to a sustained disinflation trend and increasingly anchored inflation expectations.

Month-on-month inflation has remained subdued, averaging around 0.4% between February and December 2025, before declining further to 0.14% in February 2026. The sustained disinflation has supported the emergence of positive real interest rates, which the central bank views as critical for value preservation, investment growth and financial sector stability.

The RBZ also credits rising foreign currency inflows and strategic interventions for stabilising the exchange rate under the Willing-Buyer Willing-Seller arrangement. Since April 2024, the central bank has injected US$1.34bn into the foreign exchange market, helping anchor the ZiG within a relatively narrow range of 25 to 27 per US dollar.

This has coincided with a narrowing of the parallel market premium to around 20%, suggesting improved alignment between formal and informal exchange rate historically a major fault line in Zimbabwe’s monetary system.

Looking ahead, Matshe reiterated that Zimbabwe’s transition to a monocurrency regime will not be rushed, emphasising that the shift is dependent on the achievement of key macroeconomic conditions rather than a fixed timeline.

These include sustained single-digit inflation, adequate foreign currency reserves, a fully efficient and unified foreign exchange market, stronger demand for the ZiG, and alignment between fiscal and monetary policy.

In a clear signal to markets anticipating policy easing, the RBZ confirmed it will maintain the Bank Policy Rate at 35%, reinforcing its hawkish stance.

“A gradual, cautious, stepwise policy adjustment path will be adopted, given the low and delicate inflation environment,” Matshe said.