RBZ Holds Rate at 35% as ZiG Shows Stability

By ETimes

HARARE – THE Reserve Bank of Zimbabwe held its benchmark interest rate steady at 35%, balancing cautious optimism with the need to sustain recent gains in ZiG stability and economic expansion.

Market analysts argue that this high rate is justified in the short term, given persistently high annual inflation of 92.1% as of May 2025 and the need to anchor inflation expectations.

The Monetary Policy Committee (MPC) expects annual inflation to fall below 30% by year-end, assuming monetary and financial conditions improve.

“However, the real interest rate remains deeply negative, which could undermine savings and incentivize speculative borrowing if inflation expectations are not well-anchored.

“Additionally, while the high rate helps control liquidity, it risks stifling credit to productive sectors, particularly agriculture and SMEs, which are critical for growth,” said one analyst.

The MPC noted that the Targeted Finance Facility (TFF) has disbursed ZiG392 million to productive sectors, while Non-Negotiable Certificates of Deposit (NNCDs) have been recalibrated to a fixed 30-day tenor to enhance liquidity management.

The MPC emphasizes full foreign currency backing for the ZiG, with US$701 million reserves covering ZiG4.7 billion reserve money and ZiG15.5 billion deposits.

Accordingly, the MPC reports sustained stability in the exchange rate, attributing it to the Willing-Buyer Willing-Seller (WBWS) interbank market, which has reduced the parallel market premium to around 20%.

“Considering the challenging and rapidly evolving risks to the global growth outlook, the MPC advised the Reserve Bank to maintain a sufficiently tight monetary policy stance,” MPC stated.

“The RBZ is committed to keeping the market informed of any policy refinements consistent with the evolution of risks and the need to balance inflation and growth objectives.”

The rising use of ZiG in transactions from 26% in April 2024 to 43% in May 2025, signals growing confidence, according to MPC.