HARARE – Zimbabwe’s banking sector has escalated pressure on the Reserve Bank of Zimbabwe (RBZ), warning that the central bank’s prolonged tight monetary stance—credited with restoring macroeconomic stability—is now constraining credit expansion and weighing on broader economic activity.
In a rare show of unity, top bankers say the RBZ’s hawkish policy framework, maintained since 2024, has delivered important gains, including exchange rate stability and a sharp decline in inflation. The measures also helped dismantle a once-thriving parallel foreign exchange market that had distorted pricing and undermined formal financial systems.
Yet, industry leaders argue that the cost of that stability is becoming increasingly evident.
Financial statements for the year ended December 31, 2025, show a sector returning to profitability, with major institutions such as NMB Bank Zimbabwe, FBC Bank Zimbabwe and CBZ Bank Zimbabwe reporting strong recoveries from prior-year losses. However, analysts caution that the rebound conceals deeper structural constraints.
“The sector has regained profitability, but remains tightly bound by restrictive monetary conditions,” said Tapiwa Sibanda, head of strategy at Trade Winds, highlighting the disconnect between improved earnings and limited lending activity.
Liquidity squeeze hits the real economy
Banking executives say the effects of tight liquidity are now spilling into key sectors of the economy. Retailers and manufacturers, in particular, are reportedly operating below optimal capacity, with some firms entering corporate rescue due to limited access to affordable financing.
Industry figures such as Pearson Gowero have pointed to rising distress in productive sectors, while James Prince Mutizwa noted persistent challenges in accessing competitively priced funding, both locally and internationally.
At the heart of the dispute is Zimbabwe’s elevated interest rate environment. The RBZ’s policy rate remains around 35%, even as inflation has eased into low single digits—creating what bankers describe as a misalignment between macroeconomic conditions and the cost of borrowing.
Targeted Finance Facility underutilised
This tension is most visible in the limited uptake of the RBZ’s Targeted Finance Facility (TFF), a ZiG1.2 billion intervention designed to support private sector lending.
More than a year after its introduction, utilisation remains minimal. According to RBZ Governor John Mushayavanhu, only ZiG56.9 million had been disbursed by mid-April 2026, leaving the bulk of the facility untouched.
Mushayavanhu has expressed concern over the low uptake, urging banks to deploy the funds to stimulate productive sectors. However, lenders argue that the issue is not access, but affordability.
Priced at approximately 30% per annum, the facility would require banks to on-lend at rates of 35% to 40% after margins—levels executives say are incompatible with a low-inflation environment.
“If prices are stable, there are very few business models that can sustain borrowing costs of 40% annually,” a senior banking executive said, warning that such rates risk incentivising speculative activity rather than productive investment.
Demand-driven lending and policy tension
The Bankers Association of Zimbabwe has defended the cautious approach to lending. Chief executive Fanwell Mutogo emphasised that credit extension remains demand-driven and dependent on viable, bankable projects.
He described the TFF as a supplementary instrument rather than a primary funding channel, noting that banks cannot deploy capital into ventures that do not offer sustainable returns.
The standoff highlights a growing policy dilemma for Zimbabwe’s monetary authorities. While the RBZ maintains that liquidity levels in the financial system are adequate, banks argue that prohibitively high borrowing costs are preventing that liquidity from reaching the real economy.
The result is an increasingly paradoxical landscape: a stabilised macroeconomic environment coexisting with weak credit growth, underutilised lending facilities, and mounting pressure on productive sectors.
Balancing stability and growth
As tensions build, policymakers face a delicate balancing act. The RBZ’s challenge will be to preserve the hard-won gains in price and exchange rate stability while recalibrating policy settings to unlock affordable credit.
For Zimbabwe’s banking sector—and the economy at large—the next phase of reform may depend less on stabilisation and more on restoring the flow of capital to businesses capable of driving sustainable growth.
The post Zimbabwe Banks Clash with Central Bank as High Interest Rates Stall Credit Growth and Economic Recovery appeared first on The Zimbabwe Mail.