zimbabwe to tighten monetary policy stance in 2025

Zimbabwe To Tighten Monetary Policy Stance In 2025

Zimbabwes central bank has reaffirmed its commitment to a tight monetary policy stance in 2025, aiming to stabilise its currency, which has depreciated by 48 since its introduction nine months ago.

Governor John Mushayavanhu stated that high interest rates will also help curb inflation, with month-on-month consumer-price increases slowing significantly from 37.2 in October to 3.7 in December. "The forthcoming 2025 Monetary Policy Statement will further contextualize and consolidate these positive prospects, and proffer more fine-tuning policies to move the economy from stability to growth," Mushayavanhu explained in a written response to questions.

Despite five failed attempts to establish a functional currency, Zimbabwes latest initiative - the gold-backed ZiG - faces challenges similar to its predecessors. Most residents prefer the U.S. dollar as a reliable store of value, with approximately 90 of transactions conducted in the greenback.

To stabilise the currency, the Reserve Bank of Zimbabwe has raised its key interest rate to 35, aiming to reduce inflation and bolster the ZiGs value. At the same time, Zimbabwe's Treasury projects a 6 economic expansion this year, driven by recoveries in the agricultural sector and growth in the iron and steel industries.

In late 2024, the central bank introduced the Targeted Finance Facility TFF, a special-purpose vehicle to finance productive sectors and stimulate economic growth. The facility is funded by banks' statutory reserves, avoiding the creation of new money that could fuel inflation.