Zimbabwe: Industry Worried Over Central Bank Monetary Policy Statement's Impact On Demand

The Confederation of Zimbabwe Industries (CZI) has warned that while the Reserve Bank of Zimbabwe's (RBZ) tight Monetary Policy Statement (MPS) has helped ease inflationary pressures, it has also significantly dampened demand.

The RBZ has maintained a restrictive monetary policy to stabilise prices, the exchange rate, and the Zimbabwe Gold (ZiG) currency. Current measures include a high policy rate of 35%, a statutory reserve requirement of 15% for savings and time deposits, and 30% for demand and call deposits.

The policy framework is designed to support the ZiG, which was introduced to restore confidence and stability in the economy. The central bank has been working to maintain the currency's stability against the US dollar.

In its latest inflation tracker, CZI noted that while the fall in inflation confirms the effectiveness of the current monetary stance in stabilising prices, the downside has been a steep decline in aggregate demand.

"While tight liquidity is helping stabilise prices, it also has negative implications on demand and hence business output and growth. Therefore, in the long term, monetary policy has to ease tight liquidity conditions as stability becomes sustainable," the industry grouping said.

CZI said keeping inflation below 1% enhances price stability and goes a long way in broadening the use of ZiG beyond a transaction currency, while acknowledging that businesses that previously preferred to trade in USD transactions only are beginning to slowly encourage ZiG payments to help them settle some of their monthly obligations.

The industry grouping said the high annual inflation rate of 93,8% is still reflective of the September 2024 devaluation of ZiG, hence will only ease in October, provided there is no other shock in the inflation drivers to cause high month-on-month inflation.

In comparison, the US$ prices remained the same between July and August 2025 as the main driver of USD inflation (S.I. 81A of 2024) was repelled in early 2025. Some of the possible signals to be derived from the stable USD prices include greater predictability in input and output costs for businesses that largely operate in US$.

The industry grouping warned that the gap between the official and parallel market rates could motivate traders to abandon the formal market.

Read the original article on New Zimbabwe.