Online Reporter
Tapiwanashe Mangwiro
THE Reserve Bank of Zimbabwe (RBZ) has maintained its benchmark Bank Policy Rate (BPR) at 35 percent, reaffirming its commitment to a tight monetary policy stance aimed at anchoring inflation expectations and sustaining exchange rate stability.
In its mid-term monetary policy review statement released yesterday, the RBZ reiterated its intention to uphold the current tight stance, while remaining responsive to data-driven signals on inflation, exchange rates, economic activity, and other key macroeconomic indicators.
Governor Dr John Mushayavanhu defended the decision, noting that with annual inflation projected to close 2025 at approximately 30 percent, the current policy rate yields a real interest rate of five percent — a level consistent with natural rates observed in other economies. The RBZ’s “Back-to-Basics” framework continues to use reserve money control as its operational target, with the floating ZiG/US dollar exchange rate serving as an intermediate nominal anchor.
“For the avoidance of doubt, the Reserve Bank is not using the exchange rate as the operational target. We are using a market-determined floating exchange rate and only influencing its movement through prudent management of reserve money,” Dr Mushayavanhu clarified.
This approach has contributed to a marked slowdown in monthly inflation, which averaged 0,6 percent between February and July 2025, although annual ZiG inflation remains elevated due to base-effect distortions.
The central bank projects that sustained low monthly inflation will bring annual inflation down to 30 percent by year-end.
While some stakeholders at consultative meetings in July advocated for a reduction in the BPR to stimulate lending and investment, the Governor cautioned against premature easing.
“Inflation has largely been a monetary phenomenon in Zimbabwe, and premature rate reductions could rekindle volatility. The RBZ will only consider lowering rates once inflation falls below the policy rate, to ensure a healthy level of positive real interest rates,” he said.
Banker Raymond Madziva welcomed the RBZ’s cautious approach but urged a gradual pivot once disinflation is firmly established.
“Maintaining 35 percent through the disinflation cycle has helped stabilise the market, but a gradual, data-driven easing from early 2026 would support credit growth,” Mr Madziva said.
He noted that commercial banks currently hold sizeable liquidity buffers, and a calibrated rate cut could unlock financing for the productive sector without reigniting inflationary pressures.
In addition to the policy rate decision, the RBZ retained minimum deposit rates at five percent for ZiG and 2,5 percent for US dollar deposits, while time-deposit rates remain at 7,5 percent and four percent, respectively.
The central bank also upheld the 30 percent foreign currency surrender requirement for exporters, pending the release of a de-dollarisation roadmap under the forthcoming National Development Strategy II (NDS2).
The RBZ has further refined its monetary toolkit by tightening Non-Negotiable Certificates of Deposit (NNCDs) to a fixed 30-day, zero-coupon tenor with no early redemption, aimed at mopping up excess liquidity and reinforcing its reserve money targeting framework.
Economic analyst Amon Buhali praised the RBZ’s transparency and stakeholder engagement, but warned against complacency.
“The mid-term review reflects a maturing central bank, yet external risks — from tighter global financial conditions to potential drought impacts — call for continued vigilance,” Mr Buhali observed.
He recommended that the RBZ complement its monetary stance with clearer forward guidance, particularly regarding the de-dollarisation timeline, to better anchor market expectations.
Governor Mushayavanhu emphasised that communication remains central to policy effectiveness.
“We have adopted communication as part of our monetary policy toolkit to shape expectations, enhance transparency, and increase the effectiveness of monetary policy itself,” he said.
With domestic growth forecast to rebound to six percent in 2025, driven by agriculture, mining, and manufacturing, the RBZ reiterated that its primary objective remains price stability, without compromising growth. As the central bank navigates the final stages of de-dollarisation amid intensifying global headwinds, market observers will be watching closely for any signs of a policy shift once disinflation is firmly secured.
Despite calls for rate cuts, the RBZ’s stance remains resolute; anchor inflation and exchange rate stability, even if it means maintaining peak policy settings longer than anticipated.
Sidumisile Mabena