Zimbabwe’s economy is projected to grow by 5% in 2026, fuelled by rebounds in agriculture and mining. But sustaining this momentum requires more than short-term gains — it demands a robust, resilient financial sector.
Deepening and expanding financial services is crucial for unlocking economic potential, driving inclusive growth, and ensuring lasting prosperity. This column explores the structural hurdles standing in the way and the practical ways to strengthen Zimbabwe’s financial future.
Decades of inconsistent monetary policy, hyperinflation, and currency volatility have damaged public trust. Public trust is essential for domestic resource mobilisation.
Without it, economic agents tend to keep cash at home or operate in the shadow economy to avoid the banking system. Historically, low confidence has led to increased cash usage (informality), limiting the liquidity banks need to support productive sectors such as mining and agriculture.
Additionally, public trust acts as a mediator, shaping how effectively financial institutions perform their core functions. The absence of trust heightens the animal spirits of panic; when trust is low, economic agents are more likely to withdraw their deposits at the first sign of minor fluctuations.
Also, a lack of trust undermines long-term planning because stable public confidence supports extended investment horizons. For example, the Reserve Bank of Zimbabwe (RBZ) aims for single-digit inflation to anchor long-term expectations, but this goal is achievable only if the public trusts the rhetoric of prudent monetary policy.
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Moreover, financial deepening requires expanding financial services to marginalised groups, which is impossible without a foundation of consumer protection and trust.
While digitalisation is a key driver of financial inclusion, its success is constrained by public perceptions of risk. Consumers only adopt new fintech if they have faith in the privacy, security, and reliability of these systems. For SMEs, trust in formal financial products is fundamental to convince them to move away from risky, informal credit sources.
In light of the foregoing, a lack of trust creates a deadweight loss for the Zimbabwean economy. Deepening the market is not just about increasing the number of banks or stocks listed on the stock exchange; it is about restoring the social contract in which money is accepted as a reliable store of value and financial intermediaries are viewed as trustworthy partners in wealth creation.
Fiscal crowding out
Fiscal crowding out significantly hampers financial deepening in Zimbabwe by diverting loanable funds from the private sector to cover persistent government budget deficits. As of September 2025, total public debt stood at US$23,4 billion, with domestic debt making up about 42% of this total.
Public sector borrowing in the domestic market absorbs liquidity that banks would otherwise lend to private enterprises. For example, in 2025, domestic debt increased by nearly US$900 million in just three months, further tightening private sector liquidity. Additionally, high government demand for loanable funds puts upward pressure on interest rates, making borrowing excessively expensive for private firms and discouraging long term capital investments.
Moreso, increased public borrowing distorts the banking sector. Banks in Zimbabwe have become highly reliant on non-core income (fees and commissions, which made up about 45% of income as of June 2025) and government securities rather than traditional private sector lending. This shift diminishes the financial sector’s role in efficiently allocating capital to the most productive parts of the economy.
Furthermore, fiscal crowding out presents monetisation risks. Historically, funding fiscal deficits through monetisation has driven inflation in Zimbabwe, weakening the stability of the local currency and decreasing the real value of financial assets, which significantly hampers the development of the financial system.
For 2026, the Zimbabwean government aims for a nearly balanced budget with a small deficit of about 0,3% of GDP to demonstrate fiscal discipline and minimise crowding out effects. However, systemic weaknesses, such as a high public wage bill that consumes 53% of revenue, continue to restrict the fiscal space for productive investments.
Distortionary taxes and levies
Increases in taxes and levies in 2026, such as value-added tax, Intermediated Money Transfer Tax, Cash Withdrawal Levy, and Digital Service Withholding Tax, while generating revenue, significantly hinder financial deepening by discouraging the use of formal banking systems and encouraging cash-based informal activities.
These taxes create a wedge between savers and investors, raising the cost of financial intermediation and undermining trust in digital payment platforms. To reduce some distortions, the 2026 budget reinstated the deductibility of interest paid on bank deposits for corporate income tax purposes. This measure aims to regain the incentive for banks to mobilise deposits and lower the cost of capital for lending, although the overall tax environment remains heavily burdened by transaction-based levies.
Infrastructural gaps
Infrastructural gaps — primarily in energy, digital, telecommunications, and transportation — operate as major obstacles to financial deepening by raising operational costs for banks, restricting the reach of digital financial services, and encouraging economic informalisation.
l To read full article visit www.theindependent.co.zw
Sibanda is an economist employed at Maxiquantus Capital Investments and Advisory. His perspectives are independent and do not necessarily reflect the views of his employer. — bravosibanda@gmail.com.
These gaps remain a key challenge despite recent government efforts, such as the National Financial Inclusion Strategy II and the distribution of satellite internet kits. To deepen the financial sector, a multifaceted approach is required.
The government should prioritise and accelerate the rollout of the Financial Sector Development Strategy (FSDS) in 2026 to mobilise long-term savings and improve access for marginalised groups. Additionally, to help the informal sector and SMEs access credit, it is necessary to fully operationalise and digitise the Collateral Registry.
Allowing movable assets to serve as formal collateral can help the financial sector extend its reach into the 70% of the economy that is currently informal and unbanked.
There is an urgent need for Public Financial Management reform. This can be achieved by implementing a Treasury Single Account and recording commitments at the purchase order stage, thereby helping to reduce domestic arrears, restore fiscal discipline, and free up liquidity for the private sector.
There is also a need to rationalise transaction taxes to reduce anti-banking sentiment. For example, transitioning the IMTT to a targeted, time-bound tax or further tapering or capping it for business to business (B2B) transactions.
Specifically, eliminating the tax on the purchase of capital goods would lower the distortionary tax wedge and encourage firms to retain liquidity within the formal banking system rather than resort to cash.
Furthermore, the government should move away from mandatory bank requirements and prescribed asset statuses that force institutions to hold government securities. By adopting a competitive auction system for Treasury Bills with interest rates set by the market, the government can prevent crowding out the private sector and enable banks to price risk more accurately in commercial lending.
Moreover, authorities should strengthen interoperability. Enhancing platforms such as ZimSwitch to ensure seamless cross platform transactions between banks and mobile money providers will lower costs and improve service delivery.
Similarly, instead of each bank building its own costly rural branches, authorities should incentivise a Shared Agency Banking Infrastructure Model. This involves standardising POS and ATM networks and allowing banks to share last-mile agents (such as rural shops) to reduce operational costs caused by infrastructure gaps.
Additionally, Zimbabwe can adopt an Open Banking Framework to set standards that enable different financial service providers to securely share data.
This encourages competition, reduces the cost of digital services, and facilitates the creation of micro credit products based on mobile money history rather than traditional bank statements, directly addressing the digital infrastructure gap.
In addition, Zimbabwe should leverage its Virtual Assets Act. With the Virtual Assets Act (No. 4 of 2025) now in effect, the nation should accelerate the integration of regulated crypto-enabled services and stablecoins into the formal system to improve remittance efficiency and settlement certainty.
To bypass the instability of the national grid, the government should also provide duty-free concessions for financial institutions and mobile network operators to install large scale solar and battery storage systems.
Ensuring that digital payment systems stay online 24/7 is critical to restoring trust in digital finance and reducing reliance on physical cash.
My parting shot
Zimbabwe’s economic aspirations for 2026 and beyond rely on a financial sector that does more than just survive; it must thrive.
By addressing structural distortions and adopting digital innovations, Zimbabwe can create a financial rail that supports not only mining giants but also smallholder farmers and entrepreneurs across the country.
Sibanda is an economist employed at Maxiquantus Capital Investments and Advisory. His perspectives are independent and do not necessarily reflect the views of his employer. — bravosibanda@gmail.com.