Online Reporter
Tapiwanashe Mangwiro
THE Reserve Bank of Zimbabwe (RBZ) says the inflation trajectory will continue to guide its interest rate decisions, with the apex bank stressing its commitment to maintaining a positive real interest rate.
RBZ Governor Dr John Mushayavanhu said the focus will remain on keeping prices low to guarantee economic stability and growth, while interest rates will be reviewed on a need basis and in line with economic dynamics.
The central bank’s Monetary Policy Committee (MPC) left the bank policy rate unchanged at 35 percent at its last meeting for the year. This is after Zimbabwe Gold (ZiG) month-on-month inflation for November remained high, at 11,7 percent, despite coming down from 37,2 percent in October.
Dr Mushayavanhu said the bank would maintain a hawkish monetary policy stance but remain attentive to avoid throttling economic growth.
“In 2025, the Reserve Bank will continue its monetary policy stance of fostering price and currency stability without prejudice to economic growth,” he stated.
“The anticipated rebound in economic growth from the estimated 2 percent in 2024 to a projected 6 percent in 2025 will support the Reserve Bank’s optimal monetary policy management.”
He highlighted the importance of maintaining positive real interest rates to protect value and curb speculative borrowing.
“The bank policy rate will continue to be reviewed by the Monetary Policy Committee on a need basis, based on incoming price data, as well as the Reserve Bank’s forecasts on expected inflation one year ahead,” he explained.
“Accordingly, a decision to review interest rates will be informed by inflation and output developments, cognisant of the need to keep positive real interest rates.”
The central bank chief’s comments come as Zimbabwe anticipates a stable inflation environment, supported by tight fiscal and monetary policies.
According to the 2025 National Budget Statement, month-on-month inflation is expected to trend below 3 percent, reflecting the Government’s commitment to macroeconomic stability.
The 2025 National Budget projects a deficit of ZiG6,1 billion, equivalent to 0,4 percent of gross domestic product (GDP), underling the Treasury’s resolve to maintain tight fiscal policies.
This modest shortfall underscores the Government’s focus on fiscal discipline amidst pressure from high debt servicing obligations, which are expected to reach ZiG19,2 billion or 7 percent of total Government expenditure.
“The small deficit demonstrates the Government’s resolve to consolidate reforms and maintain fiscal discipline, even as it balances the need for essential public services and debt repayments,” noted economist Ms Gladys Shumbambiri-Mutsopotsi.
“Aligning fiscal policy with the RBZ’s monetary objectives will be crucial to sustaining stability.”
Dr Mushayavanhu expressed optimism about the external sector, citing sustained increases in foreign currency receipts and diaspora remittances, as global economic conditions improve.
He also pointed to expectations of a favourable agricultural season as a key factor in bolstering economic resilience.
“Improved food security will not only moderate food inflation but also reduce the food import bill, further enhancing the balance of payments position,” he said.
While these factors provide a strong foundation for economic growth, he acknowledged the need for vigilance.
“Global economic uncertainties, including fluctuating commodity prices and geopolitical tensions, could pose risks to foreign currency inflows and overall stability,” he cautioned.
The RBZ’s monetary policy road map has, however, sparked diverse reactions among economists.
Ms Shumbambiri-Mutsopotsi praised the bank’s balanced approach but emphasised
the importance of external shock management.
“The projected 6 percent growth is encouraging, especially if it is supported by a strong agricultural season and a favourable external sector,” she said.
Another economic analyst, Mr Namatai Maeresera, offered a more cautious perspective, questioning whether the RBZ’s policies would translate into tangible benefits for ordinary citizens.
“The emphasis on positive real interest rates is theoretically sound, but it’s essential to consider the broader economic context,” Mr Maeresera said.
“High interest rates can stifle borrowing and investment, particularly for small and medium enterprises (SMEs), which are key drivers of job creation and economic growth.”
He called for greater transparency in inflation forecasting.
“Decisions on interest rates should be guided by robust and transparent data.
“Any misalignment between inflation forecasts and actual economic conditions could have unintended consequences,” he warned.
The interplay between monetary and fiscal policies will be critical in shaping the country’s economic trajectory in 2025.
With the Government aiming for tight fiscal discipline to complement the central bank’s monetary measures, the focus will be on achieving macroeconomic stability without stifling growth.
“The combination of tight fiscal and monetary policies creates a conducive environment for stability,” Ms Shumbambiri-Mutsopotsi noted.
“However, ensuring that these policies are inclusive and support key sectors like SMEs will be vital for sustained economic progress.”
As the country approaches 2025, the RBZ’s inflation-guided policy framework reflects cautious optimism, rooted in stability and strong growth prospects.
But the success of this strategy will depend on the effective alignment of fiscal and monetary measures, as well as the resilience of the economy to external and domestic challenges.
