ZIMBABWE’s central bank is now encouraging banks to reduce their effective statutory reserves towards 15%, in a move aimed at unlocking liquidity and boosting lending in a market constrained by a tight monetary policy.
With current reserve requirements as high as 30%, banks have been forced to keep large portions of deposits idle limiting their capacity to extend credit.
Businesses have complained about a massive drop in seeking capital from local banks as these financial institutions took defensive positions amid currency volatility to ensure capital adequacy.
Consequently, the RBZ is responding to the deepening liquidity crunch that has stalled lending and strained economic activity resultantly.
However, the RBZ maintaining the current bank policy rate at 35% lending will continue to be expensive to firms.
“Stakeholders called for the reduction in statutory reserve requirements in both USD and ZiG in order to boost banks’ lending capacity to their clients,” RBZ governor John Mushayavanhu said in the bank’s newly 2025 Mid-Term Monetary Policy Statement released yesterday.
He said the RBZ had used statutory reserves as one of its monetary policy tools to mop-up excess liquidity from the market, which had been key in supporting the obtaining price stability.
“The current statutory reserve requirements are set between 15% and 30% depending on the nature of the deposits.
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“Banking institutions can, therefore, easily reduce the effective statutory reserve requirements towards 15% by attracting more long-term deposits,” Mushayavanhu said.
“The current differentiated statutory reserve requirements is supportive of deepening the money market, promoting long-term savings and engendering greater financial stability.
“The statutory reserve ratios, therefore, remain unchanged and will be reviewed when appropriate and consistent with the monetary policy thrust.”
He said that stakeholders had acknowledged the Targeted Finance Facility (TFF) as a positive initiative and underscored the need for extending financing to companies involved in the supply value chains and enhancing lending conditions for long term funding.
Boosting production in productive sectors—such as agriculture, manufacturing, and mining—stimulates economic growth by generating real value, increasing output and creating multiplier effects across the economy.
This leads to job creation, higher incomes and greater domestic consumption.
Moreover, higher production in these sectors can improve export performance, attract investment, and reduce dependence on imports, all of which strengthen the balance of payments and overall economic resilience.
“The Reserve Bank introduced the Targeted Finance Facility financed from the pool of banks’ statutory reserves held at the Reserve Bank to ensure continued flow of credit to productive sectors,” Mushayavanhu said.
“TFF has gone a long way in supporting the productive sectors of the economy particularly agriculture, manufacturing and wholesale and retail.
“TFF will continue to be availed exclusively to productive sectors of the economy, with the exception of the retail sector.”
He claimed that the money market has maintained a persistent daily long position, indicating that there is adequate liquidity available for lending.
Loans and advances grew from ZiG55,93 billion in December 2024 to ZiG67,51 billion by June, reflecting a 20,7% increase over six months.
While this upward trend suggests banks have been extending more credit, the sustainability of this growth would depend on the quality of loans, sectoral distribution and broader monetary conditions.
“Banks are, therefore, encouraged to set trading limits for each other to avoid concentration of liquidity in a few banks and make lending available to other economic agents,” Mushayavanhu said.
“In this regard, the Reserve Bank encourages value chain suppliers to access bridging finance from their bankers.”
