FINANCIAL service group, FBC Holdings Limited (FBC) says the Reserve Bank of Zimbabwe’s (RBZ) tight monetary policy measures is causing a build-up of domestic expenditure arrears by the government.
In last week’s 2026 national budget, it was revealed that public debt had grown 8,5% to nearly US$23,4 billion as of September, from the end of 2024.
The increase was driven by the government increasing its domestic debt position to US$9,79 billion, an 18,34% increase from December 2024.
Explaining this growth, the Zimbabwe Public Debt Management Office said addressing domestic expenditure arrears was creating “liquidity pressures for suppliers, particularly small and medium-sized enterprises, and may lead to fiscal pressures for government—including due to higher costs of goods and services as suppliers price in payment delays.”
Basically, the RBZ’s tight liquidity position, which is causing cash shortages to control the value of the ZiG, is inadvertently creating fresh debt for the government.
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“The Reserve Bank of Zimbabwe (RBZ) implemented tight monetary policy measures. These measures successfully slowed money supply growth, stabilised the exchange rate and lowered inflation,” FBC said in its review of the 2026 national budget.
“A critical lingering vulnerability, however, is the continued build-up of domestic expenditure arrears by the government, which impinges on private sector liquidity and underscores the imperative for more sustainable public finance management.”
FBC said with decreased external financing flows and the exhaustion of the available Special Drawing Rights allocation, the government faced growing expenditure needs with increasingly constrained financing options.
“Whilst revenue performance was strengthened through measures such as the removal of VAT [value-added tax] exemptions and enhanced compliance, these gains were outpaced by demands for public wages, capital outlays and debt service,” FBC said.
This, FBC added, caused a fiscal deficit predominantly financed through domestic sources, including T-bill issuances and central bank overdraft facilities.
“This budgetary expansion fuelled a rapid increase in domestic liquidity, which in turn triggered a sharp currency devaluation in September 2024 and a loss of confidence.”
The World Bank also confirmed that the exchange rate remains RBZ controlled in its latest economic update.
“While the parallel premium has been coming down, it remains elevated in part because of structural features,” the bank said.
“In any country, the emergence of a parallel exchange rate premium is caused by a mismatch between the official, government-controlled exchange rate and the actual market value of a currency, reflecting the degree of exchange rate overvaluation.”
