Online Reporter
Tapiwanashe Mangwiro
BANKS are expected to gradually reduce ZiG lending rates following the Reserve Bank of Zimbabwe’s (RBZ) decision to lower the Bank Policy Rate by five percentage points, a move aimed at aligning monetary policy with significantly improved inflation dynamics.
The cost of borrowing in Zimbabwe has remained relatively high, largely guided by the central bank’s policy rate, as authorities sought to curb inflation and maintain price stability after decades of economic volatility.
However, calls have been growing for lending rates to be reduced in line with the sharp decline in inflation to record lows following the introduction of the Zimbabwe Gold (ZiG) currency in April 2024 and the implementation of a tight monetary policy framework.
Last week, the RBZ reduced the benchmark interest rate from 35 percent to 30 percent, marking the first policy rate cut since the introduction of the ZiG currency.
The Monetary Policy Committee (MPC) said the decision was informed by a sustained decline in inflation, which has remained below five percent since January this year.
Annual inflation stood at 4,4 percent in May, down from 4,8 percent in April and significantly lower than the peak of 95,8 percent recorded in July 2025.
The policy rate serves as a benchmark for the cost of credit in the economy and influences the interest rates charged by commercial banks on loans and other credit facilities.
Responding to questions on whether banks would now lower borrowing costs for customers, RBZ Governor Dr John
Mushayavanhu said the impact would depend on the nature of individual loan agreements.
“That question is for the banks to answer. Remember, there are various types of loan contracts. Some borrowers may have borrowed on fixed interest rate contracts, while some may have borrowed on floating rate contracts where the interest rate is based on the lending bank’s minimum lending rate plus a margin. Under this scenario, the effective rate will automatically reduce when the bank reviews its minimum lending rate downwards,” he said.
The Governor emphasised that the MPC’s decision should not be viewed as a shift towards a more accommodative monetary policy stance.
“The MPC’s decision to reduce the Bank Policy Rate does not entail easing monetary policy at this stage, but a realignment of the policy rate to the structural shift in inflation dynamics,” he said in the committee’s post-meeting statement.
Bankers Association of Zimbabwe (BAZ) chief executive officer Mr Fanwell Mutogo said the reduction in the policy rate would ultimately result in lower borrowing costs, although the pace and extent of adjustments would differ from one institution to another.
“The Reserve Bank of Zimbabwe’s decision to cut the Bank Policy Rate from 35 percent to 30 percent reduces the benchmark cost of credit across the banking sector. While existing loan interest rates are typically adjusted downward as a result, the immediate impact depends heavily on the specific loan agreement,” said Mr Mutogo.
He noted that most loans within the banking sector are structured on variable interest rates and are therefore likely to benefit from the policy adjustment.
“The vast majority of bank loans are variable. For these borrowers, banks will adjust their prime lending rates downward in tandem with the RBZ’s cut. The monthly interest charges will be recalculated, resulting in lower monthly repayments,” he said.
However, Mr Mutogo said customers with fixed-rate loan agreements would not immediately benefit from the latest reduction in the policy rate.
“If one signed a fixed-rate contract, their interest rate is legally locked for the duration of the loan. The repayments will remain exactly the same,” he said.
Analysts say lower lending rates could improve access to credit for businesses and households, supporting economic activity while preserving the gains made in stabilising inflation and strengthening confidence in the ZiG currency.
