RBZ intervention deserves cautious applause

This week, the Reserve Bank of Zimbabwe Governor, Dr John Mushayavanhu, revealed that the central bank deployed US$2.1bn into the foreign exchange market over the past two years.

The revelation deserves a cautious applause.

At a time when confidence in the domestic currency was fragile and speculative pressures threatened to derail another currency reform, the central bank chose to intervene decisively.

Judged purely on outcomes, the strategy has delivered measurable gains.

Zimbabwe is experiencing one of its longest periods of exchange rate and price stability in recent memory.

Inflation has remained subdued, the parallel market premium has narrowed considerably, and businesses have operated in a far more predictable environment than they did during previous episodes of currency instability.

These are not insignificant achievements in an economy that has endured decades of monetary turbulence.

However, intervention should never become a permanent substitute for market confidence. A stable currency cannot rely indefinitely on official support. Sustainable stability ultimately depends on strong economic fundamentals, disciplined fiscal policy, growing exports, rising productivity and, above all, public confidence in the currency itself.

The encouraging development is that the RBZ has reportedly managed to increase foreign currency reserves even while supporting the market.

This suggests the interventions have been measured rather than reckless.

Critics are also right to question whether billions of dollars could have generated greater long-term economic returns through infrastructure, industrial development or export promotion.

That debate is legitimate.

Yet it must also be acknowledged that meaningful investment is difficult to attract in an environment characterised by exchange rate volatility and runaway inflation.

Stability is itself an economic asset.

The challenge now is for policymakers to build on this progress.

The ultimate objective should be a foreign exchange market that functions efficiently with minimal central bank intervention. That will require deeper confidence in the ZiG, continued policy consistency and reforms that expand productive capacity.