World Bank Urges Zimbabwe to Maintain Tight Monetary Policy

The World Bank has advised Zimbabwe to uphold its strict monetary policy stance and avoid excessive spending to sustain low inflation and exchange rate stability.

According to the financial institution, a surge in money supply at the start of 2024 led to rising inflation, but the introduction of the Zimbabwe Gold (ZiG) currency in April helped restore price stability. Zimbabwe had faced significant inflationary pressures in early 2024, partly due to increased government expenditure on infrastructure projects, raising concerns of a return to hyperinflation similar to 2008.

Authorities, including Finance Minister Mthuli Ncube and Reserve Bank of Zimbabwe (RBZ) Governor John Mushayavanhu, have reaffirmed their commitment to maintaining tight fiscal and monetary policies to ensure lasting economic stability. Measures such as requiring some taxes and import duties to be paid in local currency have been introduced to bolster demand for the ZiG.

By Ruvarashe  Gora

In an update on Zimbabwe’s economy, the World Bank emphasized the importance of adhering to strict monetary policies to prevent inflation from escalating. This recommendation aligns with similar sentiments from the International Monetary Fund (IMF), which recently noted that Zimbabwe’s economy is rebounding from last year’s drought and is projected to grow by 6% in 2025, supported by improved agricultural output.

RBZ Deputy Governor Innocent Matshe, speaking at a business forum last week, reassured stakeholders that the central bank remains focused on economic stability and will avoid unchecked money printing. He explained that the RBZ would carefully regulate market liquidity to curb speculative activities while balancing inflation control with economic growth.

To reinforce its monetary policy stance, the RBZ raised interest rates and statutory reserve requirements in September 2024. This move helped contain inflation, with the monthly inflation rate dropping from 37.2% in October to 3.7% in December.

Authorities maintain that disciplined monetary policies are crucial to sustaining economic stability and ensuring predictability in the market, which businesses see as key to long-term growth.