RBZ opts for caution over relief

LIVINGSTONE MARUFU / CLOUDINE MATOLA

The Reserve Bank of Zimbabwe (RBZ) has opted for caution over relief, maintaining its policy rate at 35% despite easing inflation, in a move aimed at anchoring inflation expectations and consolidating fragile macroeconomic gains.

RBZ Governor, Dr John Mushayavanhu, defended the decision, rejecting intensifying calls for an interest rate cut and reaffirming the central bank’s commitment to a tight monetary stance.

Annual Zimbabwe Gold (ZiG) inflation fell to 3.8% in February from 4.1% in January, extending a run of single-digit inflation not seen in nearly three decades. Yet, Dr Mushayavanhu argued that a structural consolidation of price stability must precede any relaxation of policy.

“Some may ask, if inflation was 4.1% in January and is now 3.8%, why not lower the policy rate?” he said.

 “The answer is simple, we first need to anchor inflation expectations.”

Economists have lauded the RBZ’s disciplined approach.

Titus Mukove said the central bank “walked the talk” by maintaining a tight stance, signalling continuity and policy consistency. Retention thresholds remain at 30%, with adjustments for small-scale miners further reinforcing the message.

“Two or three months of single-digit inflation do not constitute a structural breakthrough,” Mukove cautioned.

“If you become too eager and adjust rates now, we risk undoing the stability we have painstakingly achieved. Business may want cheaper credit, but monetary policy must first secure the fundamentals.”

Mukove stressed that the core mandate of the RBZ is price and financial stability, not growth stimulation.

“Growth is largely driven by fiscal policy. Monetary policy must anchor the fundamentals—stable inflation, prices, and interest rates.”

Other economists echoed the praise.

Tony Hawkins described the Monetary Policy Statement as unsurprising, highlighting continuity as its key message, while Zimbabwe Economics Society vice president Misheck Ugaro noted that the policy reflects the hybrid framework targeting reserve money and exchange rate stability.

“I can’t find anything new in the MPS apart from new notes, the authorities have maintained the tight monetary policy stance,” Hawkins stated.

Zimbabwe Economics Society vice president Misheck Ugaro said:  “The MPS is positive and reflects the outcomes of the hybrid Monetary framework that targets reserve money and exchange rates to bring about stability.”

Another economist, Malone Gwadu welcomed the conditions-based approach to the mono-currency transition, saying it bolsters market confidence by linking adoption to robust economic fundamentals rather than a fixed 2030 deadline.

However, Gwadu cautioned that the cost of stability is high.

“Borrowing remains expensive for many businesses, and liquidity constraints persist,” he said. He also noted the potential benefits of RBZ cooperation with banks to reduce charges and offer real interest on savings, which could deepen financial inclusion.

In a consumer-friendly move, commercial banks have voluntarily lowered transaction fees. Cash withdrawals are now capped at 2% (down from 4%), point-of-sale charges at 1.5% (down from 3%), while balance enquiries and certain cash deposits are now free. Transactions under US$5 and accounts below US$100 incur no service fees.

The RBZ also announced a new series of ZiG banknotes to circulate from April 7, 2026, with denominations ranging from ZiG10 to ZiG200, to be gradually introduced alongside older notes.

On mobile money oversight, Dr Mushayavanhu warned operators against misuse, giving them until June to clean up customer databases in partnership with the Registrar-General’s Office. “Nano-loans offered via mobile platforms must now be underwritten by commercial banks and backed by deposits,” he said. “We cannot have an environment where money is being created without backing.”

Addressing the shift from a fixed 2030 mono-currency target, the Governor said the focus is now on “conditions precedent”—including durable single-digit inflation and sufficient foreign currency reserves. With import cover currently at 1.5 months, the transition will be market-driven and gradual.

Responding to concerns over cash shortages, Dr Mushayavanhu said the banking system holds daily excess liquidity of ZWG2 billion, pointing to distribution challenges rather than aggregate scarcity.