ZIMBABWE’S banks have yet to fully pass on the Reserve Bank of Zimbabwe’s (RBZ) interest rate cuts, with the central bank warning that the widening gap between policy and lending rates is pricing productive sectors out of formal credit, where liquidity is needed most.
Since the introduction of the ZiG in April 2024, the RBZ has been deliberately strangling the market of liquidity to control the money supply and thereby maintain the exchange rate.
As a result, there has been notable inflation and exchange rate stability, with ZiG inflation averaging 4.2% in the seven months to July and the exchange rate holding between ZiG25 and ZiG27 per US dollar, while the parallel-market premium has narrowed by about 15%.
In June, the central bank lowered its bank policy rate to 30%, down from 35%.
However, bank lending rates have remained elevated since the cut, raising concerns among businesses over the cost of accessing credit.
This was confirmed in last week’s 2026 mid-term monetary policy review statement, in which the RBZ noted that stakeholders had raised concerns that the bank policy rate remained high and was limiting access to affordable credit.
“Following the reduction in the bank policy rate, the Reserve Bank has observed that some banks have not reviewed their lending rates consistent with the structural shift in inflation and monetary dynamics,” the RBZ said in the statement.
“Currently, the gap between the bank policy rate and average lending rates has become very wide, pricing productive sectors out of formal credit. The Reserve Bank encourages banking institutions to align their lending rates with movements in the bank policy rate and cost of funds.”
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Additionally, the RBZ noted market concerns regarding the level of interest rates applicable to US dollar loans, stating that it would continue to engage banking institutions to align domestic USD lending rates with the cost of funds.
Without adequate support for productive sectors, businesses will continue to face constrained access to affordable capital, limiting their ability to expand operations, invest in capacity, and contribute to economic growth.
“After the central bank reduced the bank policy rate, we expected the banks to follow suit and also reduce their lending rates. But we are in an environment where competition should prevail. So, we leave that to market forces,” RBZ governor John Mushayavanhu told Standardbusiness on the sidelines of a post-2026 mid-term monetary policy review statement breakfast meeting.
“Because what will happen is that if one bank lowers its lending rates, customers will move to that bank, and then the other banks will follow suit.
“So, as a central bank, we are not going to prescribe to banks to say you should reduce your lending rates from that rate to that rate. We leave that to market forces.”
The breakfast meeting was hosted by the Confederation of Zimbabwe Industries, where participants confirmed the expenses associated with sourcing local capital from banks.
“In the last monetary policy, we lowered the bank policy rate from 35% to 30%, but the banks did nothing. If we were to lower it to 25%, they might still not make a move. That is the challenge that we have with the banks,” Mushayavanhu said.
“Banks are taking deposits at zero per cent. They cannot then say that because of the bank policy rate they have to charge you excessively. When you are being charged high interest rates, talk to your bank manager and ask why.”
He was quick to add that the problem of lending rates was not unique to Zimbabwe, noting that central banks in other markets were also grappling with commercial banks that were slow to reduce lending rates when benchmark rates declined.
“The cut in the bank policy rate to 30% is supportive of credit, but with inflation at 3.2%, policy remains deeply restrictive in real terms,” local broker IH Securities said.
“The scarcity of ZiG is deliberate, as the Reserve Bank keeps local currency tight to anchor disinflation, at the cost of limited consumer spending power in ZiG, leaving transactions skewed to the US dollar where most liquidity sits.
“Tax incentives will shift this only slowly. The banks look solid but squeezed, being well-capitalised and liquid with low bad loans, yet less profitable than a year ago, so lending growth and volumes, not margins, must drive earnings.”
This comes as banks themselves have seen profitability come under pressure, with aggregate sector profit falling 22.6% to US$142.43 million in the six months to June, from US$184.07 million a year earlier.
The decline is partly attributed to reduced foreign exchange-related income, as ZiG stability has curbed revaluation and forex gains.
Yet, the sector remains well-capitalised and liquid, with deposits rising 40.4% to ZiG158.29 billion (US$5.99 billion) by June, while the average prudential liquidity ratio stood at 55.9%, well above the 30% regulatory minimum.
This suggests that the pressure on lending costs is occurring despite banks maintaining substantial liquidity buffers.
