RBZ governor’s monetary policy test

LIVINGSTONE MARUFU

 

Reserve Bank of Zimbabwe (RBZ) Governor Dr. John Mushayavanhu is set to present the 2025 Monetary Policy Statement (MPS) today, as Zimbabwe battles a deepening economic crisis marked by rising inflation, currency instability, exchange rate volatility, mass business closures, and dwindling consumer confidence.

With the economy teetering on the edge, Dr Mushayavanhu faces a defining moment.  The big question is can he unveil decisive measures to restore stability, ease liquidity constraints, and steer Zimbabwe out of economic turmoil?

Or will his policies be more of the same rhetoric?

The latest economic data paints a dire picture. Month-on- month United States dollar inflation shot up from 0.6% in December 2024 to 11.5% in January 2025.

Local currency inflation surged from 3.7% to 10.5% in the same period.

The Zimbabwe Gold (ZiG) currency has also plunged by 43% in just five months.

At the same time, retail shelves are emptying as businesses reject ZiG and struggle to restock due to forex shortages.

Despite these warning signs, Mushayavanhu has remained tight-lipped about his plan of action.

“Yes, it’s the correct position (that I will present the MPS tomorrow (today),” he confirmed to Business Times, a market leader in business, finance and economic reportage.

 

But when pressed for details, he simply responded, “That would be pre-empting the MPS.”

Economists warn that half-measures will not be enough—radical reforms are needed to prevent a full-blown meltdown.

Economist, Dr. Prosper Chitambara believes the tight monetary stance will continue, but some adjustments may be necessary.

“We expect the central bank to maintain its tight monetary policy stance to sustain some of the gains that we are seeing especially on the foreign exchange market. We expect the central bank to adjust downwards nominal interest rates,” he noted.

 

 

Another economist, Professor Gift Mugano argues that the exchange rate must be liberalised immediately.

“He (Dr Mushayavanhu) should liberalise the exchange rate so that there wont be  a huge gap between the official rate and the parallel market rate,” Mugano said.

“This  will reduce foreign exchange losses and will not create pressure from businesses asking for more forex as the local currency will be functional.”

Mugano also questioned why Zimbabwe is struggling with forex liquidity despite recording US$12bn in foreign receipts.

“The MPS should promote accountability as to how the forex is used in the country. It doesn’t make sense that the country has US$12bn foreign receipts yet the local currency is not stable and there is a serious shortage of forex in the market. Something is not adding up as countries like Kenya, with only US$5bn in forex reserves, and their currency is stable, while Zimbabwe, with more than double that, is struggling  with forex challenges.”

 

Yet another economist, Tony Hawkins, told Business Times that:  “My expectations are very low.

“I doubt he (Dr Mushayavanhu) will do anything to improve the situation but repeat the same mantra of a stable exchange rate, stable prices and a  tight monetary policy.”

Another economist, speaking anonymously, expressed deep frustration over Zimbabwe’s repeated currency failures.

“We launched ZiG in April 2024, and by September, it had already collapsed,” he said.

“People don’t trust it. Retailers are closing because they have become dumping grounds for a currency nobody wants. If the MPS fails to restore confidence in ZiG, it will be another failed experiment.”

Another economist, Malone Gwadu, warned that tight liquidity is choking the industry, reducing access to much-needed capital.

“The RBZ must find a middle ground,” he said.

“The interest rates need to be looked at in a way that complements industry and also does not pose a threat to speculative borrowing that feeds the exchange rate induced inflation and currency volatility.”

The 2025 MPS is a defining moment for Dr Mushayavanhu and Zimbabwe’s economy. The country cannot afford another round of vague promises and ineffective policies.

The question remains: Will Mushayavanhu rise to the occasion, or will this be just another chapter in Zimbabwe’s long history of economic mismanagement?

The nation is watching.

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