The Reserve Bank of Zimbabwe (RBZ) is taking proactive steps to strengthen the country’s monetary stability and restore market confidence amid a fragile macroeconomic environment. In an exclusive interview, RBZ Governor John Mushayavanhu shared his vision for the central bank’s strategy, which focuses on containing inflation, stabilizing the exchange rate, and promoting economic growth.
Stable Inflation Trends
Since the introduction of the Zimbabwe Gold (ZiG), the month-on-month inflation rate has been relatively stable, averaging around 0.5% since February 2025. This trend is largely attributed to the central bank’s prudent money supply management, which has kept money supply growth in check. The RBZ has been successful in maintaining a balance between growth potential and price stability, ensuring the economy can withstand external shocks.
- The RBZ has maintained a stable inflation rate, with month-on-month inflation below 1% since February 2025.
- The central bank has been successful in containing money supply growth, ensuring the economy can withstand external shocks.
- The current monetary policy stance has been appropriate, balancing growth potential and consolidating price stability.
Strong Foreign Reserves
The RBZ has made significant strides in building its foreign reserves, which now stand at US$731 million. This represents a substantial increase from the US$270 million recorded in April 2024. The current level of foreign reserves is close to a month of import cover, up from 0.4 import cover in April 2024. The RBZ is working towards aligning its foreign reserves with international benchmarks, with a target of three to six months import cover by 2029.
| Foreign Reserves (US$ million) | Import Cover (months) |
|---|---|
| 270 (April 2024) | 0.4 |
| 731 (June 2025) | 0.95 |
Healthy Banking Sector
The RBZ has been monitoring the banking sector closely, with the non-performing loan (NPL) ratio currently standing at 3.34%. This is well below the global benchmark of 5% and reflects a healthier asset quality for banks. The low NPL ratio suggests that banks are better positioned to absorb credit shocks, enhancing their resilience and confidence among investors.
- The NPL ratio is currently 3.34%, well below the global benchmark of 5%.
- The low NPL ratio reflects a healthier asset quality for banks.
- The banks are better positioned to absorb credit shocks, enhancing their resilience and confidence among investors.
Formal Channelling of Remittances
The RBZ has established a dedicated Diaspora Desk to promote formal channelling of remittances. The desk engages with the diaspora community to understand their needs and investment preferences, fostering a more enabling environment for their participation in the economy. The RBZ has also designated diaspora remittances as free funds, allowing recipients to receive their funds in foreign currency and utilize them as they desire.
Monetary Policy Framework
The RBZ is not currently using an inflation-targeting framework. Instead, it is focusing on controlling the reserve money as an operational target to stabilize the exchange rate. This approach is preferred in a dollarized environment, where the prudent monetary policy mix should include both local and foreign currency components. The RBZ continues to monitor the developments in both money supply and the exchange rate, aiming to achieve low inflation targets.
Gold-Backed Digital Tokens and ZiG Notes
The RBZ has issued gold-backed digital tokens (GBDTs) and ZiG notes, which are backed by gold reserves. The outstanding GBDTs are now 196.6 kgs, equivalent to about US$21.2 million, while ZiG notes in circulation are about US$12.5 million equivalent. The RBZ has a reserves accumulation strategy to build foreign currency and gold reserves to a minimum of three to six months import cover by 2029.
Targeted Finance Facility
The RBZ has established a Targeted Finance Facility (TFF) to provide on-lending funds to banks at an interest rate of 20%, with a maximum on-lending rate of 30% to end-users. This facility has enhanced access to affordable, low-cost financing for critical sectors such as agriculture, manufacturing, and mining.
Summary
The RBZ is taking proactive steps to strengthen the country’s monetary stability and restore market confidence. The central bank’s strategy focuses on containing inflation, stabilizing the exchange rate, and promoting economic growth. The RBZ has made significant strides in building its foreign reserves, promoting formal channelling of remittances, and supporting the banking sector. With a strong monetary policy framework and a focus on long-term confidence, the RBZ is well-positioned to achieve its objectives and drive economic growth in Zimbabwe.