RBZ to unveil 2026 MPS tomorrow

LIVINGSTONE MARUFU

The Reserve Bank of Zimbabwe (RBZ) is expected to stay the course and maintain a restrictive monetary policy stance when Governor Dr John Mushayavanhu presents the 2026 Monetary Policy Statement (MPS) tomorrow, as authorities seek to entrench price stability, restore currency predictability and safeguard broader macroeconomic stability, Business Times has learnt.

The central bank faces a delicate balancing act, consolidating disinflation gains while under mounting pressure from business leaders to ease liquidity constraints and lower borrowing costs currently pegged at 35%.

Economists say the central bank is unlikely to bow to pressure for interest rate cuts despite easing inflation, opting instead to consolidate disinflation gains and entrench currency predictability in a still-fragile macroeconomic environment.

Economist Eddie Cross expects the 2026 MPS to reinforce policy continuity and consolidate the recent disinflation trend.

“The strategies and policy stance adopted by the Reserve Bank in the past year has worked. Inflation is down, the currency stable and because of this I expect that they will maintain their position,” Cross said.

Another economist Professor Gift Mugano told Business Times, a market leader in business, financial and economic reportage, that the central bank does not have the liberty to adjust the policy rate on the basis of a single data point.

“My expectation on the monetary policy is that the central bank must maintain a tight mandate policy which is characterised by reducing money supply, maintaining safe requirement ratios at 30% where they are. And of course, maintaining the policy rate of 35%.

I know that business and the companies are clamouring for reductions of interest rate or policy rate, loosening of the monetary policy. But I think you cannot say when you have just secured a single digit inflation, which is just one data point, you  want to reduce your interest rate and you loosen your monetary policy, you lower your reserve requirement ratio, you allow printing of money to take place. If  the RBZ does that we definitely lose stability and we still have a challenge even with economic agents,” Professor Mugano said.

He said some economic agents still deny that the current stability is genuine, underscoring the need to entrench positive expectations over time.

“So I don’t expect the central bank to reduce interest rates when they present their monetary policy. Neither do I expect them to lower reserve requirement ratio and to allow more liquidity in the market because that will counter the current stability which we are having. I think the question is also to post back to companies and say, those who are arguing say, we now need to make some adjustments because of single digit inflation,” Professor Mugano stated.

He challenged businesses to apply corporate logic to macroeconomic management.

“Is there any company executive or management who are going to say, let’s now spend more because we now have more sales. It just made one windfall. It doesn’t happen like that in companies. So the same reasoning can be also applied when you look at the monetary policy instruments. You cannot adjust because of one single data point. So I expect a tight mandate policy in short,” Professor Mugano added.

Yet another economist, Tony Hawkins, was blunt in his assessment, saying he had limited expectations from the MPS.

“No seriously I just expect more repetitions of complacent and self satisfaction,” Hawkins said.

Business leaders argue that while inflation has eased materially, monetary conditions remain highly restrictive, squeezing liquidity and constraining productive activity.

Executives are pressing for improved liquidity, manageable interest rates, currently hovering around 35%, and higher foreign currency retention thresholds. They warn that the prevailing tight stance has left companies struggling to meet financial obligations and maintain operational efficiency.

Zimbabwe National Chamber of Commerce president Tapiwa Karoro said:“As a business, our expectation is that the 2026 Monetary Policy Statement firmly consolidates the disinflation gains while avoiding policy over-tightening that constrains productive activity. Inflation has eased materially, yet monetary conditions remain highly restrictive through elevated interest rates and statutory reserve requirements. With growth projected at around 5% in 2026, policy calibration should progressively shift from crisis containment to growth-compatible stability.”

He warned that the current structure of the economy is characterised by distortions.

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

Karoro added that the burden of policy tightening is falling disproportionately on 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,” he added.

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

However, the central bank, recently said it will not rush to cut interest rates without assurances that recent gains in inflation control and economic stability will be safeguarded.

After a year of tight monetary policy and relative exchange rate calm, the industry is now looking for guidance on the next phase, whether the bank will cautiously ease rates in step with falling inflation, while preserving the hard-won stability.

The current policy rate of 35% has helped anchor inflation expectations and steady the Zimbabwe dollar (ZiG). Yet, lending rates continue to sharply constrain borrowing across manufacturing, agriculture, and commerce.

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

All eyes will now be on whether the central bank maintains the policy rate at 35%, tweaks it marginally to accommodate business, or doubles down on its restrictive stance in a bid to cement stability.

The issuing of new Zimbabwe Gold notes is also expected to take centre stage in tomorrow’s presentation.