RBZ assures inflation spike temporary, highlights measures to stabilise economy

Reserve Bank of Zimbabwe (RBZ) Governor Dr John Mushayavanhu has assured the nation that the recent spike in inflation is temporary, attributing it to a surge in rental price adjustments.

Responding to Business Hub, Dr Mushayavanhu provided insights into the central bank’s monetary policy stance, the uptake of the Targeted Finance Facility (TFF), and the recent increase in USD interest rates by some banks.

He said the monthly ZiG inflation rate, which experienced a sudden rise to 10,5 percent in January 2025 after a downward trend since October 2024 was as a result of a surge in rental price adjustments, which alone contributed 6,3 percentage points to the overall inflation rate.

“The sharp rise of month-on-month inflation to 10,5 percent in January 2025, largely driven by a surge in rental price adjustments, was transitory in nature,” stated Dr Mushayavanhu.

He added that the remaining 4,2 percentage points were attributed to other categories, emphasising that the spike was a temporary shock.

The Governor expressed confidence that inflation would return to its expected path by the first quarter of 2025, citing the effectiveness of the tight monetary conditions implemented in September 2024.

“This gives us the comfort that the spike in January 2025 was a temporary shock, and the monthly inflation would return to the expected path by the first quarter of 2025,” he said.

Responding to concerns over the recent increase in USD interest rates by some banks to as high as 20 percent, Dr Mushayavanhu clarified that the central bank does not regulate interest rates on foreign currency-denominated instruments. He explained that the RBZ’s Policy Rate is designed to signal a tight monetary stance, discouraging speculative borrowing that could destabilise the exchange rate and prices.

“From a policy perspective, interest rates are neither controlled nor regulated in Zimbabwe, particularly the interest rates on foreign currency-denominated instruments,” he said.

The Governor also highlighted the role of market discipline in ensuring competitive rates.

“There is also market discipline within the banking system to ensure that any banking institution that charges outrageously high interest rates would lose business and customers to other banks offering more competitive rates,” he noted.

Dr Mushayavanhu provided an update on the Targeted Finance Facility (TFF), a window designed to support the short-term liquidity requirements of key productive sectors. Funded from banks’ statutory reserves at the RBZ, the facility aims to minimise adverse effects on money supply and inflation.

“The Targeted Finance Facility (TFF) is a window to support the short-term liquidity requirements of key productive sectors of the economy,” he said.

“The Facility, funded from banks’ statutory reserves at the Reserve Bank, will have minimal adverse effects on money supply and inflation, given that its source of finance is principally re-cycled money already at the Reserve Bank.”

Applications for the TFF are now open, with eligible beneficiaries encouraged to approach their participating banks.

Dr Mushayavanhu emphasised that the facility would be administered through rigorous due diligence to prevent abuse and align with the RBZ’s monetary policy objectives.

“The TFF will be administered through banks, who undertake the necessary and rigorous due diligence on the targeted beneficiaries, to ensure that there is no abuse of money, and that the facility contributes in supporting the current monetary policy efforts of the Reserve Bank,” he added.

Dr Mushayavanhu’s remarks underscore the RBZ’s commitment to maintaining stability in the face of economic challenges.

While acknowledging the temporary nature of the January inflation spike, he reiterated the central bank’s focus on tight monetary conditions and targeted interventions to support productive sectors.

As Zimbabwe navigates a complex economic landscape, stakeholders will be closely watching the RBZ’s next moves, particularly in addressing inflation, stabilising interest rates, and ensuring the effective implementation of the TFF.-ebsinessweekl