The Reserve Bank of Zimbabwe (RBZ) has confirmed deliberately constraining market liquidity, maintaining daily positions below its optimal liquidity levels (OLL) as part of a tight monetary policy.
The move forms part of the RBZ’s strategy to stabilise the ZiG, introduced on April 5, 2024, by limiting excess liquidity in the market, tightening money supply conditions, and curbing speculative pressures that could destabilise the exchange rate.
RBZ’s tight liquidity regime has coincided with a sharp rise in domestic debt, which climbed to US$9,79 billion as of September 2025 from US$8,14 billion at the end of 2023, before the ZiG’s introduction.
The increase reflects growing payment arrears to suppliers, as the government faces mounting constraints in settling obligations amid restricted liquidity conditions.
“To support the tight monetary stance, the daily market positions were kept below optimal liquidity limits throughout 2025,” RBZ governor John Mushayavanhu said in the 2026 Monetary Policy Statement on Friday.
“The daily limits were below the ZiG500 million optimal Liquidity level prior to 27 May 2025 and stayed within the revised threshold of ZiG600 million during the remainder of 2025.”
Mushayavanhu said liquidity levels were consistently maintained within the OLL, and cumulative transactions since the start of 2025, with the market closing at ZiG298,73 million by year-end.
“To align liquidity to targeted money supply growth, the Reserve Bank enhanced the non-negotiable certificates of deposits (NNCDs) through tying them to a fixed term of 30 days and curtailed early redemption,” he said.
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“The outstanding level of NNCDs as of31 December 2025 amounted to ZiG3,53 billion.
“The liquidity management and cashflow management committees constituted by treasury and the Reserve Bank were revived and have played a critical role in ensuring congruence between government payments and money supply targets.”
The RBZ said the OLL was determined by the transaction activities on the real time gross settlement system (RTGS) platform and the overall reserve money target.
“The OLL is regularly reviewed by the Reserve Bank in line with daily transaction developments in the RTGS system.
“The Reserve Bank advised banks to trade among themselves to avoid having funds locked into NNCDs,” Mushayavanhu said.
“In addition, banks were encouraged to also offer attractive interest rates for term deposits to attract savings and time deposits in order to have adequate liquidity.
“The Reserve Bank will, however, initiate a transition to indirect monetary policy instruments starting with the introduction of a remunerated deposit facility.”
Reflecting optimal money control and liquidity management, reserve money was largely contained within the set target in 2024 and 2025, consistent with inflation and growth targets.
The RBZ reported that the ZiG reserve money for December 2025 amounted to ZiG5,31 billion, an amount below the set target of ZiG5,35 billion.
“The tight control of reserve money resulted in a decline of the growth of the local currency component of broad money, which averaged 2,7% on a monthly basis in 2025.
“This growth compares favourably with an average of above 40% prior to the introduction of ZiG,” Mushayavanhu said.
“The slowdown in broad money growth is largely attributed to monetary policy measures implemented by the Reserve Bank throughout 2025.
“As such, the local currency component of M3 increased from ZiG14, 48 billion recorded in December 2024 to ZiG20,17 billion in December 2025, translating to an annual growth of 39,3%, which was consistent with economic growth of above 6% and average annual inflation of 67,7%.”
To ameliorate the impact of the tight monetary policy on the productive sectors of the economy, the RBZ introduced the targeted finance facility (TFF) in January 2025.
“The TFF disbursements amounted to ZiG476,12 million, representing a 79,35% take-up of the ZiG600 million facility as of the end of 2025,” Mushayavanhu said.
“The facility has gone a long way in sustaining economic activity in an environment of tight monetary policy.
“The TFF outstanding balance stood at ZiG162,52 million as at 31 December 2025.”
He said the TFF was aimed at ensuring a continued flow of credit to the productive sectors of the economy.
“In this regard, the Reserve Bank is extending the facility under the same terms and conditions and will avail an additional ZiG600 million under the TFF in 2026, making a total of ZiG1,2 billion available to productive sectors,” Mushayavanhu said.
However, the platform has failed to meet all the demands of the local businesses.
