RBZ rejects liquidity crisis claims

LIVINGSTONE MARUFU

A widening rift has emerged between Zimbabwe’s monetary authorities and the corporate sector over the true state of liquidity in the economy, with the central bank insisting that surplus cash is circulating in the financial system even as companies warn that an acute liquidity squeeze is choking business activity.

The dispute underscores one of the most critical tensions in Zimbabwe’s fragile economic recovery — whether the tight monetary policy stance adopted to stabilise the country’s gold-backed currency is inadvertently starving the productive sector of the capital it needs to operate and grow.

Speaking at the Confederation of Zimbabwe Industries (CZI) Business and Economic Outlook breakfast meeting, Reserve Bank of Zimbabwe (RBZ) Governor Dr John Mushayavanhu firmly dismissed concerns that the economy is facing a liquidity crisis.

“We have no liquidity crunch in the economy, not at all,” Mushayavanhu told business leaders and policymakers gathered at the meeting.

“We have an excess of ZiG2bn in the market every day.”

The central bank chief maintained that the current monetary framework has successfully maintained discipline in the financial system, arguing that liquidity levels remain adequate and that the banking sector continues to function normally.

However, his remarks come against a backdrop of growing concern from companies across multiple sectors that limited access to credit and constrained money supply conditions are placing enormous pressure on operations, working capital, and investment plans.

Industry executives say that while macroeconomic indicators may suggest liquidity exists within the banking system, the reality on the ground is that businesses are struggling to access affordable funding, a situation that is tightening cash flows and slowing economic activity.

The debate highlights the difficult balancing act facing policymakers as they attempt to preserve currency stability while ensuring that productive sectors have sufficient financial oxygen to sustain growth.

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“We have no liquidity crunch in the economy, not at all,” Dr Mushayavanhu told business leaders and policymakers.

“We have an excess of ZiG2bn in the market every day.”

In the central bank’s view, the problem is not the absence of money but inefficiencies within the banking system itself.

Mushayavanhu argued that lenders with surplus funds are failing to extend liquidity to those facing shortfalls, creating bottlenecks that distort the flow of capital.

“Companies with genuine needs can go to their respective banks for their capital requirements,” he said.

Yet across Zimbabwe’s corporate sector from manufacturing and agriculture to retail and financial markets executives paint a different picture.

A growing number of listed companies have privately and publicly raised alarm over what they describe as a severe liquidity crunch that has crippled working capital cycles, constrained credit access and forced businesses into survival mode.

Executives say borrowing costs hovering around 35% make credit effectively inaccessible, leaving firms trapped between tightening monetary conditions and collapsing demand.

For many businesses, the consequences are hitting hard including stalled production lines, shrinking inventories and delayed payments along supply chains.

“We are seeing companies struggling to meet daily working capital requirements,” one analyst said. “The liquidity that the central bank claims exist is simply not reaching the productive sectors of the economy.”

Zimbabwe’s central bank tightened liquidity conditions in October 2024 after the Zimbabwe Gold currency, widely known as ZiG, plunged more than 40 percent in September that year. The monetary tightening — aimed at halting the currency’s slide and restoring macroeconomic stability — sharply reduced money supply in the market.

While the move helped stabilise exchange rate volatility, it has come at a steep cost to businesses already grappling with a difficult operating environment.

Across multiple corporates executives are echoing similar concerns.

Itai Pasi, chairperson of CFI Holdings, acknowledged that the liquidity squeeze has had devastating consequences across the formal economy.

“The period did not go without its challenges, characterised by tightened liquidity which was an inadvertent effect of the stringent monetary policies,” Pasi said.

She noted that the pressure has accelerated the growth of Zimbabwe’s informal sector — a cash-driven marketplace operating largely outside regulatory frameworks.

As informal businesses expand, formal companies remain burdened by taxes, compliance costs and high financing charges, further weakening their competitiveness.

The result has been a wave of closures and retrenchments among established retailers struggling to survive.

“Formal retailers are finding it increasingly difficult to compete,” Pasi said, noting that several companies have already shut down branches and cut jobs.

Agribusiness firms are also feeling the strain.

Alexander Jongwe of Ariston Holdings said rising input costs and limited access to liquidity are slowing down production cycles.

“Challenges continued to be presented by the economic environment, both local and external,” Jongwe said. “These were characterised locally by increasing input costs and liquidity challenges slowing down the working capital chain.”

Miton Macheka, chief executive of Amalgamated Regional Trading (ART Corporation) , said the credit environment remains extremely tight.

“Liquidity remained constrained and high borrowing costs persisted,” Macheka said.

The liquidity squeeze highlights a delicate balancing act facing Zimbabwe’s monetary authorities.

Following years of hyperinflation and repeated currency collapses, policymakers have prioritised stabilising the new gold-backed ZiG currency through aggressive liquidity control.

The strategy has had some success.

Between July and December 2025, Zimbabwe experienced a period of relative currency stability as the central bank maintained strict control over money supply, significantly reducing the exchange-rate volatility that had plagued the economy.

But the stabilisation has come at the expense of economic momentum.

Companies say the restricted circulation of the currency has constrained consumer spending and weakened demand across the formal economy.

Lydia Mutamuko, the Company Secretaryof African Distillers Limited said businesses are struggling to secure affordable capital.

“The restricted circulation of ZiG coupled with elevated borrowing costs created obstacles for businesses seeking affordable capital, thereby impeding sustained economic growth,” Mutamuko said.

Consumer-facing sectors have been particularly affected.

Addington Chinake, board charman of Simbisa Brands said liquidity constraints are eroding purchasing power and weakening demand.

“Liquidity constraints persisted, limiting consumer spending power and maintaining pressure on demand in the formal sector,” Chinake said.

He added that businesses are also battling high taxation, including the Intermediated Money Transfer Tax (IMTT), alongside rising operating costs driven by electricity shortages.

Managing director of packaging manufacturer Nampak Zimbabwe John Van Gend said tight monetary policy has become a defining feature of the operating environment.

“Tight monetary policy measures remain the key anchor for stability, though liquidity conditions were constrained as a result,” Van Gend said.

Zimbabwe’s capital markets are also feeling the impact.

The Zimbabwe Stock Exchange has seen trading volumes shrink as liquidity drains from the market.

A key factor has been the migration of several major companies to the Victoria Falls Stock Exchange, a US dollar–denominated exchange designed to attract foreign capital.

According to Arnold Chibvongodze of the Stockbrokers Association of Zimbabwe, the shift has significantly reduced local currency liquidity on the domestic exchange.

“With major contributors to local currency liquidity moving to VFEX, Zimbabwe Stock Exchange trading volumes have plummeted,” Chibvongodze said.

As a result, brokers are increasingly dependent on a handful of heavyweights — including Econet Wireless Zimbabwe and Delta Corporation — to sustain trading activity.

Dual-currency operations, analysts say, are further complicating the market and encouraging speculative behaviour.

Chibvongodze suggested that adopting the South African rand as a reference currency could simplify trade and reduce volatility.

“A single currency system would ease regional trade and eliminate the complexities of dual-currency operations,” he said.

Regulators acknowledge the challenges.

The Securities and Exchange Commission of Zimbabwe said reforms are underway to improve market stability, including the introduction of exchange-traded funds and other instruments aimed at deepening liquidity.

“We are addressing these issues at a high level to ensure sustainable solutions,” said Takawira Bote.

Yet economists warn that the country’s liquidity dilemma reflects a deeper structural challenge.

Stability cannot be achieved through liquidity control alone, they argue.

Unless tight monetary policies are matched by rising production, stronger industrial output and broader economic reforms, Zimbabwe risks slipping into a cycle where stabilisation suppresses growth while growth itself remains elusive.

“Liquidity management must be linked to productivity,” one analyst said. “If liquidity is not absorbed by increased production, inflationary pressures and loss of confidence in the currency become inevitable.”

For now, Zimbabwe’s corporate sector remains caught in the crossfire between monetary discipline and economic survival.

Industry leaders warn that the liquidity squeeze is already reducing aggregate demand, slowing production and threatening the viability of many businesses.