THE Parliamentary Portfolio Committee on Budget and Finance has given the Reserve Bank of Zimbabwe (RBZ) until June 30 to cut interest rates, arguing that high borrowing costs are strangling businesses despite a sharp fall in inflation.
The concern is understandable. Credit is expensive, investment is constrained and firms are struggling to expand in an economy still finding its footing after years of volatility.
Yet well-intentioned pressure can still cross a dangerous line.
ZiG annual inflation has fallen sharply — from 95,8% in July 2025 to 4,1% in January 2026, before edging up slightly to 4,84% in April. Despite this disinflation, the policy rate remains at 35%, leaving real interest rates above 30%. In practical terms, the cost of borrowing is prohibitive and the transmission mechanism between monetary stability and productive credit remains severely distorted.
Lawmakers are not wrong to raise concern. Private sector actors have made similar appeals and RBZ itself has acknowledged shifting inflation dynamics, with governor John Mushayavanhu warning that fuel price increases in March could temporarily push inflation up before stabilising within single-digit territory for the remainder of 2026.
There is, therefore, a legitimate macroeconomic debate to be had about the timing and magnitude of any rate adjustment. The question is not whether rates should eventually fall — but who decides and on what basis.
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Central bank independence is a sacrosanct principle in modern monetary governance precisely because it insulates interest rate decisions from short-term political pressure.
Parliament’s attempt to impose a deadline risks eroding that firewall. Once legislative bodies begin dictating monetary timelines, the line between oversight and operational control becomes dangerously blurred.
The risk is not theoretical. Zimbabwe has lived through the consequences of subordinating monetary policy to political imperatives.
The era of runaway inflation — when savings were wiped out and the country produced infamous “millionaires and billionaires overnight” — was not an abstract policy failure. It was the result of a systemic breakdown in monetary discipline, including quasi-fiscal activities that stretched the central bank beyond its mandate.
That history is not distant enough to be forgotten.
If Parliament can set deadlines for interest rate cut today, what prevents it — in a moment of fiscal strain — from demanding monetary financing of government obligations tomorrow? Central bank independence is designed precisely to prevent such slippery slopes. Once breached, credibility is difficult to restore and even harder to price back into markets.
At the same time, independence must not be mistaken for rigidity or detachment.
If inflation has genuinely stabilised, then maintaining excessively high interest rates risks strangling the recovery that stability is meant to enable.
A 35% policy rate in a low-inflationary environment is difficult to justify on orthodox monetary grounds and it risks suppressing investment, credit uptake, and job creation.
The responsibility, however, lies with RBZ to make that adjustment — guided by data, forward-looking risk assessments and currency stability considerations — not parliamentary instruction.
What Zimbabwe needs is not institutional confrontation but disciplined coordination anchored in clearly defined roles. Parliament must focus on structural reforms that reduce country risk, improve productivity and deepen financial markets. The central bank must retain autonomy over interest rates, guided by inflation dynamics and liquidity conditions rather than political calendars.
If rates are to be reduced, it must be because the macroeconomic fundamentals justify it — not because a deadline has expired.
Ultimately, this debate is not only about the cost of credit. It is about the credibility of Zimbabwe’s economic governance framework. Once central bank independence becomes negotiable, it is rarely restored without high cost — and often, only after the horses have already bolted.