Online Reporter
Tapiwanashe Mangwiro
BANKS are expected to gradually reduce ZiG lending rates following the Reserve Bank of Zimbabwe’s decision to lower the Bank Policy Rate by 5 percentage points, a move aimed at aligning monetary policy with significantly improved inflation dynamics.
The cost of lending in Zimbabwe has been relatively high, guided by the central bank’s bank policy rate, as the country sought to reduce and maintain low inflation, which had troubled Zimbabwe since the turn of the century.
But there have been growing calls to lower lending rates in line with the sharp drop in inflation to record lows, following the introduction of the ZiG currency in April 2024, amid a tight monetary policy stance.
Last week, the RBZ reduced the benchmark rate from 35 percent to 30 percent, marking the first interest rate cut since the introduction of the ZiG currency in April 2024.
The Monetary Policy Committee (MPC) said the decision followed 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, a sharp decline from 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 rates charged by commercial banks on loans.
Responding to questions on whether banks would now reduce interest rates for borrowers, 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,” he said.
“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.”
The Governor emphasised that the MPC’s decision should not be interpreted as a shift towards an 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 lower borrowing costs, although the timing and extent of adjustments would vary across institutions.
“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,” said Mr Mutogo.
“While existing loan interest rates are typically adjusted downward as a result, the immediate impact depends heavily on the specific loan agreement.”
He noted that most loans in the banking sector are based 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,” he said.
“The monthly interest charges will be recalculated, resulting in lower monthly repayments.”
However, Mr Mutogo said borrowers on fixed-rate contracts would not immediately benefit from the latest policy adjustment.
“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 the ZiG currency.
