Online Reporter
THE Reserve Bank of Zimbabwe Governor John Mushayavanhu has recently presented a comprehensive agenda that attempts to reconcile three objectives — stabilising prices, preserving financial stability, and building public trust in a currency that is slowly but surely finding its feet.
That balancing act explains why the RBZ is holding the policy rate at 35 percent even as headline inflation drifts back into single digits, while simultaneously rolling out consumer-friendly measures such as fee cuts and a programme to introduce new ZiG banknotes.
Defending a high policy rate when inflation has fallen to 3,8 percent is uncomfortable but understandable in context. Zimbabwe’s recent macroeconomic history is a cautionary tale: episodes of rapid easing have frequently been followed by returns to inflation. The Governor’s medical metaphor — don’t stop the medication too early — captures a prudent mindset.
Anchoring expectations matters more than a point or two of headline inflation in the short term; if the public and markets believe the central bank will tolerate inflation resurgence, stabilisation will prove temporary. International parallels are helpful: advanced central banks held rates even after inflation peaked, precisely to re-anchor expectations. Zimbabwe, however, has a much more fragile credibility buffer, which means the RBZ’s credibility-preservation strategy has to be communicated clearly and executed consistently.
That communication is evident in the corrective tone toward misconceptions about statutory reserves and in the transparency about money-supply growth collapsing to 2,7 percent in 2025. The public deserves clarity: policy is not a series of isolated decrees but a co-ordinated framework.
If the RBZ can keep explaining the logic behind decisions — why reserves are structured as they are, why liquidity distribution matters more than aggregate liquidity — confidence will grow. Yet communication alone won’t suffice. Implementation will be tested in the months ahead, especially with cash circulation frictions.
The banking sector’s voluntary fee reductions are a rare but welcome alignment of regulator and industry incentives. Capping withdrawal and point-of-sale fees, eliminating balance inquiries and exempting small transactions and low balances from charges, are redistributive moves that will help low-income households who rely on cash and mobile payments.
They are also politically savvy: cost of financial intermediation matters for adoption and for the perceived fairness of the financial system. If commercial banks follow through, the gesture will boost financial inclusion and consumer trust. The RBZ should cement this progress by publishing regular compliance data and ensuring smaller banks, often squeezed on margins, are not unduly penalised for lower revenues.
The menu of measures for mobile network operators (MNOs) is arguably the most consequential for financial stability. The Governor’s blunt warning — clean up customer databases, desist from creating unbacked electronic credit exposure, and cede nano loan underwriting to commercial banks — is targeted at a genuine systemic risk. Mobile money has been a financial lifeline in many African markets, but when telecoms create credit exposures detached from banking intermediation, the risk of loosely backed monetary creation emerges. Requiring bank underwriting for nano loans, insisting on balance-sheet backing, and threatening licence revocation if payment rules are flouted are strict but necessary steps to avoid shadow credit growth and money like liabilities proliferating outside regulated channels.
Nevertheless, execution will be tricky. MNOs and banks operate different business models and incentives. Tightening the rules risks slowing digital credit and payments growth if banks are unwilling or unable to underwrite at scale. The RBZ must therefore create a framework for partnership: clear prudential standards, time-bound transition milestones, technical support for shared infrastructure, and supervisory forbearance only where risk controls are demonstrably improving. Otherwise, the policy could push payments back into cash or informal arrangements — counterproductive for a modernising economy.
The shift from a fixed 2030 mono currency deadline to a “conditions precedent” approach is the most conceptually mature element of the statement. Declaring victory on a calendar date is an invitation to disappointment; tying the transition to sustained single-digit inflation and sufficient import cover (three to six months) is logical.
It realigns policy with fundamentals —monetary and external stability — rather than political timetables. It also preserves flexibility: transition will be market-driven, not a top-down command. That is essential. Currency adoption is ultimately about convenience and confidence — businesses and consumers will switch voluntarily if the domestic currency is stable, easily convertible, and preferred.
Yet the conditions set by the RBZ are exacting. Import cover of three to six months and durable low inflation require more than prudent monetary policy; they depend on fiscal discipline, export performance, and rebuilding foreign investment confidence. The central bank’s insistence that the public will become “indifferent” between US dollars and ZiG before the switch is a useful metric — indifference reflects real convertibility and trust — yet reaching that point requires cross-government co-ordination. The Ministry of Finance, revenue authorities, and trade regulators must all play their part.
The move to incorporate small-scale miners into export surrender rules is a pragmatic closing of loopholes that undermine fairness and foreign-exchange generation. The incremental 10 percent surrender requirement is modest but symbolically important.
The central bank’s approach is not without risk. The 35 percent policy rate, if maintained too long, could stifle credit growth, depress investment, and slow the very economic expansion that would underpin a successful mono-currency transition. Fee caps and mandates on MNOs, if poorly implemented, could stunt digital finance innovation. The RBZ must therefore be nimble — willing to adjust instruments, provide clear timelines, and use targeted measures to support credit to productive sectors while keeping macroprudential guardrails intact.
In sum, the RBZ’s policy statement reflects a credible, cautious architecture for returning Zimbabwe to monetary normalcy. It acknowledges the dangers of past episodes while charting a pragmatic, conditions-based path forward. Success will depend on disciplined implementation, inter-agency co-operation, and continuous communication to nurture public and market confidence. If the RBZ can translate this blueprint into consistent practice, Zimbabwe could finally exit the era of stop start stability and usher in a sustained period of monetary credibility — an outcome the economy and its people sorely need.
