RBZ governor charts course for stability, growth in 2025

Reserve Bank of Zimbabwe Governor, Dr. John Mushayavanhu, has outlined his key priorities for 2025, emphasising a continued focus on price and currency stability while supporting economic growth.

In an exclusive interview with Business Weekly, Dr Mushayavanhu highlighted the anticipated rebound in GDP growth, driven by a favourable agricultural season.

“Our primary focus will remain fostering price and currency stability while supporting economic growth,” Dr Mushayavanhu stated.

“We anticipate a rebound in GDP growth from an estimated 2 percent in 2024 to a projected 6 percent in 2025.”

This projected growth will be driven by a favourable agricultural season, which is expected to enhance food security, reduce inflation and moderate the food import bill.

Furthermore, Dr Mushayavanhu emphasised the continued strength of the external sector, with sustained increases in foreign currency receipts and diaspora remittances. These developments, he noted, will further solidify the stability achieved thus far.

“On interest rates, we remain committed to maintaining positive real rates to preserve value and curb speculative borrowing,” he added.

The Bank Policy Rate will be reviewed as necessary, based on inflation trends and economic output.

“Any adjustments will be informed by incoming data and our inflation forecasts.”

The Bank policy rate was kept at 35 percent at the last meeting of the central bank’s Monetary Policy Committee.

De-dollarisation, while a key objective, remains a gradual process.

“De-dollarisation is a process, not an event, especially given Zimbabwe’s historical context,” Dr Mushayavanhu acknowledged.

Despite this, he highlighted encouraging progress, noting that the ZiG has been widely accepted as a medium of exchange, and transactional dollarisation has declined significantly.

He said the ZiG was designed to be fully backed by a basket of foreign reserves, including gold, other precious minerals, and nostro balances.

“This backing means we can only issue domestic notes and coins when fully covered by verifiable reserves. We adopted a cautious “drip-feeding” approach to circulation, balancing the need for adequate currency with promoting a cash-lite economy. We started with smaller denominations and introduced the ZiG20 note. Higher denominations like ZiG50, ZiG100, and ZiG200 will be rolled out only when necessary.”

Dr Mushayavanhu said financial dollarisation remains high, “but we are addressing this through policies that increase demand for the local currency”, he explained.

These policies include requiring tax payments in ZiG and implementing measures to boost confidence in the currency.

“Over time, as economic fundamentals improve, we expect further de-dollarisation.”

Dr Mushayavanhu emphasised the importance of building public confidence in the ZiG.

“The ZiG was designed to be fully backed by a basket of foreign reserves, including gold, other precious minerals, and nostro balances.”

This backing, coupled with a cautious approach to currency circulation, has been instrumental in strengthening the ZiG’s role in the economy.

He said since April, the central bank has aggressively mobilised reserves, increasing them from US$285 million to over US$540 million by November.

“This reserve level covers the current stock of ZiG reserve money more than three times over. At the local currency equivalent of ZiG13,6 billion, our reserves also exceed total local currency deposits in the banking sector, which stand at ZiG12,9 billion.”

This strong reserve position reinforces confidence in the ZiG and ensures its stability, said Dr Mushayavanhu.

“I want to assure Zimbabweans and the business community that the RBZ remains committed to sound monetary policies that foster stability and growth,” Dr Mushayavanhu concluded.

“We are building a strong foundation for medium- to long-term stability, underpinned by a resilient currency, robust reserves, and a disciplined financial sector.”

“The progress we have made in the past nine months demonstrates our resolve to “walk the talk.”

Dr Mushayavanhu’s emphasis on price and currency stability, coupled with a measured approach to de-dollarisation, provides a roadmap for navigating the economic challenges ahead. As Zimbabwe enters 2025, the success of these policies will be crucial for sustained economic growth and prosperity.-esiessweekl