THE Reserve Bank of Zimbabwe has pushed back against accusations that its monetary policy stance is excessively tight and sacrificing economic growth, pointing to stronger-than-earlier forecast economic expansion for 2026 as evidence that caution and growth can coexist.
The central bank is on record saying it will not rush to lower interest rates without guarantees that the macroeconomic gains achieved thus far on the stability front will remain anchored.
Speaking at a post-Monetary Policy Statement breakfast meeting organised by the Confederation of Zimbabwe Industries (CZI), Reserve Bank of Zimbabwe RBZ) governor Dr John Mushayavanhu addressed persistent criticism that the 35 percent policy rate is stifling economic activity, arguing that the results speak for themselves.
“People have been accusing us of being too tight, to the extent where we are sacrificing growth,” the Governor said.
“But we still remember last year. We started by saying GDP (gross domestic product) growth would be 6 percent. Then it rose to 6,6 percent. On the same calibrated rails — the same calibrated targets in the form of reserve money — and we ended up there.”
The official revealed that current projections suggest even stronger performance.
“I think we are likely to grow by more than 8 percent — more than 8,5 percent — on the same policy,” he said.
The forecast, if realised, would represent a significant acceleration from initial expectations and would outpace many regional peers. It also suggests that the tight monetary stance has not had the contractionary effect that critics feared.
The governor acknowledged the difficulty of determining the appropriate policy rate in a volatile economic environment, posing a series of rhetorical questions about monetary theory.
“The question is: what is the neutral rate? Did we get it wrong? If it had been a 15 percent rate, where would we go? That is not for me to say.”
The concept of a “neutral” interest rate — one that neither stimulates nor restricts economic activity — is notoriously difficult to calculate in any economy, let alone one emerging from decades of instability. – The Herald
