IN a landmark shift for Zimbabwe’s often-troubled public finances, the government has not borrowed from the Reserve Bank of Zimbabwe (RBZ) since April 2024 — a streak which officials say will extend into next year.
This marks a decisive break from practices that once fuelled inflation, currency collapse and repeated economic crises.
The development, confirmed by RBZ governor John Mushayavanhu, places hard numbers behind a policy pledge that once sounded aspirational in a country long synonymous with central bank financing of government spending.
It also forms a central pillar of a broader economic stabilisation programme that is beginning to show tangible results, including sharply reduced exchange-rate volatility and a steady build-up of foreign currency reserves.
“I do not believe in quasi-fiscal activities. It is not going to happen under my watch,” the governor declared in April 2024, directly confronting the long-standing scourge of such off-budget operations.
For years, quasi-fiscal activities, where the central bank funded government programmes, subsidies and parastatal obligations outside the formal budget, acted as a powerful engine of money creation.
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The RBZ itself was left burdened with monumental debts accumulated while acting as lender of last resort to the state.
International financial institutions, including the International Monetary Fund and the World Bank, have long-pressed Harare to end the practice, shift the liabilities onto the Treasury and refocus the central bank on its core mandate of macro-economic stability.
The World Bank last year advised the RBZ to transfer the remaining US$3,6 billion of its total external liabilities to the Treasury as soon as possible, noting that only US$1,8 billion had been moved so far.
“The government has not borrowed from the central bank since April 2024, and this trend is expected to continue in 2026, as stated in the National Development Strategy (NDS) 2,” he told the Zimbabwe Independent in an exclusive interview.
The restraint has been achieved despite legislation that still allows government borrowing from the central bank of up to 20% of the previous year’s revenues.
But in a signal of intent to entrench the new discipline, the governor said authorities plan to sharply tighten that ceiling.
“The statutory limit, however, currently allows government borrowing from the central bank not to exceed 20% of the previous year’s revenues,” Mushayavanhu said.
“However, as espoused in the NDS2, the statutory limit for government accommodation at the central bank will be reviewed downwards to 5% or less of previous year’s fiscal revenues, in line with most Sadc (Southern African Development Community) countries.”
The move would bring Zimbabwe closer to regional norms and strengthen the institutional firewall between fiscal policy and monetary management, long demanded by investors and multilaterals alike.
Yet not all economists are convinced that an outright exclusion of central bank financing is feasible in a country grappling with deep development deficits.
United States-based economist Fungisai Nota sounded a note of caution, arguing that Zimbabwe’s economic constraints are simply too severe to sustain a blanket prohibition.
“In theory, a government policy that prohibits borrowing from the central bank is often presented as fiscal discipline,” he noted.
“By financing expenditure through taxes, external borrowing, foreign aid, or domestic bond markets, such a policy is expected to deliver macroeconomic benefits — lower inflation, greater currency stability, a more credible central bank, reduced political rent-seeking and stronger long-term fiscal planning.
“In practice, however, Zimbabwe’s economic constraints are too severe for an outright exclusion of central bank financing.
“The country’s development challenges, particularly in healthcare, infrastructure and education, are far larger than what alternative funding sources can realistically support,” Nota added.
He pointed to a narrow tax base, prohibitively expensive and conditional external borrowing, shallow domestic capital markets and aid flows that often come with policy strings attached.
“Under these conditions, a blanket prohibition on central bank borrowing risks entrenching underinvestment in critical public goods rather than promoting sustainable stability,” Nota said.
“A more pragmatic approach would be to allow limited, rules-based central bank financing — capped at 5% to 10% and strictly ring-fenced for productive sectors such as healthcare, infrastructure, and education.
“Given the scale of Zimbabwe’s development deficit, the issue is not whether central bank financing should exist, but whether it can be governed responsibly and used to unlock long-term economic capacity.”
Development economist Chenayi Mutambasere said the credibility of the governor’s claim hinges on how one defines central bank financing.
To inject liquidity, she explained, the central bank uses tools such as the Targeted Finance Facility, which recycles banks’ reserves into lending for the economy.
“While suppliers don’t borrow directly from the RBZ, the central bank creates the framework,” she noted.
“Banks then on-lend to sectors like firms strained by delayed government payments. This cushions fiscal stress indirectly — a form of quasi-fiscal accommodation, even if it’s not a direct Treasury overdraft.”
She also highlighted the growing use of Treasury Bills to settle government arrears. “It securitises unpaid invoices, easing cash pressure but expanding domestic debt,” Mutambasere said.
Settlements, including retention deposits, have often been intermediated by commercial banks such as CBZ, “shifting the burden to the financial system”.
Looking ahead to 2026, she warned that avoiding direct RBZ borrowing would only aid stability if accompanied by genuine clearance of arrears, less reliance on short-term bills, transparency around quasi-fiscal tools, and stronger revenue.
“Without these, fiscal pressures are merely rerouted — from overt central bank lending to indirect liquidity and debt accumulation — with much the same damaging consequences,” she noted.
For now, the RBZ is betting that credibility and stability will themselves unlock growth.
Mushayavanhu said inflation is expected to continue its downward trajectory, reaching single digit levels in the first quarter of 2026.
Annual inflation in the Zimbabwe Gold (ZiG) currency slowed to 19% in November from 32,7% in October, while US dollar inflation remained elevated at 13,1%, reflecting currency and statistical effects.
He attributed the improvement to greater flexibility in the foreign exchange market and smoother access to foreign currency, which have delivered what he described as a “relatively stable exchange rate”.
Volatility has been kept below 5% in 2025, compared with swings of more than 50% in 2024.