Harare, Zimbabwe — A senior banking executive has criticised the Reserve Bank of Zimbabwe’s (RBZ) recent monetary policy approach, arguing that its focus on stabilising the exchange rate is hindering economic growth.
The anonymous banker, speaking to The Zimbabwe Mail, described the RBZ’s measures as “counterproductive,” citing challenges the policies have created for local banks in meeting daily client demands.
In September 2024, the RBZ devalued the Zimbabwean dollar (ZWG) from a premium rate of ZWG13.80 to ZWG25.28 in an attempt to narrow the disparity between the official and parallel market rates, which were around ZWG35 at the time. This adjustment aimed to increase the currency’s acceptance in the market. Additional policy actions included raising the statutory reserve requirement for both local and foreign currency savings and time deposits from 5% to 15%, effectively reducing banks’ available funds for lending and operations.
The central bank’s policies yielded a modest increase in the value of the Zimbabwe Gold (ZWG) dollar, which rose 2.4% to 27.9986 per US dollar, according to data released Monday by the RBZ. However, despite this temporary currency strengthening, the banking executive questioned the long-term impact of these measures on the banking sector and the broader economy.
“The RBZ’s primary focus seems to be on exchange rate stability, but this has come at a cost. The increased statutory reserve requirements mean we are required to deposit more funds with the central bank, leaving us with limited resources to service our clients effectively,” the Bulawayo-based banker explained.
The executive pointed to the RBZ’s recent announcement that local companies were unable to fully utilise a US$25 million offering on the interbank market as an example of the strain on the financial sector. “They expect us to access this US$25 million, yet they’re taking more of our money in statutory reserves. It’s just not feasible,” he argued.
The banker further warned that the central bank’s tight monetary policy stance has limited banks’ ability to lend to the productive sector, a restriction he believes could have far-reaching economic consequences. He urged the RBZ to consider the potential long-term risks associated with prioritising exchange rate stability over supporting economic growth.
“Maintaining exchange rate stability is important, but it shouldn’t come at the cost of economic growth. We need a balanced approach that enables banks to lend and support productive sectors,” he said.
As Zimbabwe grapples with economic challenges, the impact of the RBZ’s monetary policy decisions will continue to be a point of debate, with financial experts divided on the best path to long-term stability and growth.