• ZiG annual inflation fell to 3.2% in July as the exchange rate remained around ZiG25 to ZiG27 per US dollar and reserves reached US$1.7 billion.
• The RBZ says lending rates have failed to adjust sufficiently after the policy rate fell to 30%, leaving productive sectors priced out of formal credit.
• Bank capital remains strong and NPLs low, shifting attention towards whether monetary stability can now produce cheaper productive finance.

Harare- Zimbabwe has entered the second half of 2026 with annual ZiG inflation at 3.2%, foreign currency reserves of US$1.7 billion and an official exchange rate that has remained within a relatively narrow range since the beginning of the year.

The Reserve Bank of Zimbabwe’s 2026 Mid-Term Monetary Policy Review shows how far the immediate monetary indicators have moved since the instability that previously dominated business planning. Annual ZiG inflation has remained below 5% throughout the year, while the Willing-Buyer Willing-Seller exchange rate averaged about ZiG25.93 per US dollar between January and July. The parallel-market premium averaged approximately 30%, though the RBZ puts it halfway at 15%.

Foreign currency reserves reached US$1.7 billion at the end of July, equivalent to 1.7 months of import cover. The RBZ says those reserves covered the ZiG deposit base almost 1.5 times and reserve money six times.

The monetary base has also remained within the ceilings agreed under Zimbabwe’s IMF Staff Monitored Programme. ZiG reserve money stood at ZiG5.73 billion in March against a ZiG5.95 billion programme ceiling and reached ZiG6.60 billion in June against a ZiG7.33 billion ceiling.

These conditions have given the RBZ room to begin lowering the price attached to its own money. The Bank Policy Rate was reduced from 35% to 30% in June. The rate on the Targeted Finance Facility was cut from 20% to 15%, with productive-sector lending through the facility capped at a maximum all-in rate of 25%.

Commercial lending has not adjusted at the same pace. The central bank says some banking institutions have failed to review their lending rates sufficiently following the reduction in the policy rate. It goes further in its assessment, stating that the gap between the Bank Policy Rate and average lending rates has become wide enough to price productive sectors out of formal credit.

That places the banking system at the centre of Zimbabwe’s next monetary transmission challenge. Lower inflation improves the predictability of future cash flows. Exchange-rate stability reduces one component of currency uncertainty. Controlled reserve-money growth reduces the probability of monetary liquidity overwhelming the foreign exchange market. A lower policy rate reduces the benchmark against which local-currency credit can be priced.

The economic return from those developments depends partly on how they reach companies financing inventory, machinery, agricultural production and working capital. Zimbabwe’s banks currently enter that adjustment from a strong prudential position.

Non-performing loans stood at 3.19% in June, below the 5% international benchmark cited by the RBZ. The banking sector’s capital adequacy ratio stood at 24.13%, double the 12% regulatory benchmark used in the central bank’s assessment.

Deposits have also expanded. Total ZiG deposits increased from ZiG18.31 billion in December 2025 to ZiG26.87 billion in June 2026. Total broad money increased 31.4% over the same period to ZiG142.01 billion, while its local-currency component rose from ZiG20.17 billion to ZiG27.95 billion.

The figures establish a banking system carrying stronger capital buffers, low reported credit impairment and a growing deposit base. They do not establish that those deposits can automatically be transformed into long-duration productive credit.

Zimbabwe’s deposit structure, currency composition and borrower risk remain important to that conversion. Banks have to price the duration of their funding against the duration of loans, assess credit risk and manage an economy that continues to operate with both ZiG and US dollars.

The RBZ has retained statutory reserves at 30% for demand and call deposits and 15% for savings and time deposits in both currencies. Those requirements remove part of the deposit base from immediate lending capacity while strengthening the liquidity architecture surrounding the banking system.

The central bank’s intervention on US dollar lending extends the credit issue beyond the ZiG. The RBZ says domestic market concerns persist around US dollar borrowing rates and points to a roughly two percentage point decline in global benchmarks, including SOFR and US Treasury Bill rates, between the end of 2024 and mid-2026. It expects that decline to feed through to domestic US dollar lending rates.

The observation is important in a highly dollarised credit market. A company borrowing US dollars is insulated from ZiG depreciation on the liability itself when its revenues are also dollar-linked, yet the cost of that funding still determines whether investment projects clear required return thresholds.

The RBZ is therefore applying pressure to both sides of Zimbabwe’s credit market. Its own local-currency benchmark has been reduced. It is asking banks to follow that adjustment through ZiG lending rates. International benchmarks have declined and the central bank is asking lenders to reassess domestic US dollar pricing as well.

The Targeted Finance Facility provides an early test of whether reducing administered borrowing costs can stimulate productive demand. The facility carries a ZiG1.2 billion envelope. Banks can access funding at 15% and lend it to productive sectors at a maximum all-in rate of 25%. Uptake has remained slow, which the RBZ attributes to the relatively high real interest rates prevailing before the latest adjustment.

A sustained increase in uptake after the rate reduction would provide evidence that borrowing costs were materially constraining demand. Continued weak uptake would require a wider examination of credit appetite, collateral requirements, investment expectations and the capacity of companies to assume additional ZiG liabilities.

The same transmission issue appears in the wider economy. Zimbabwe’s foreign currency receipts increased 47.8% to US$10.72 billion during the first six months of 2026. Foreign payments reached US$7.30 billion, while the current account surplus was estimated at US$1.3 billion. Mineral exports and remittances have strengthened the external position supporting the exchange rate.

The RBZ has used part of those flows to build reserves and support foreign exchange availability. Export surrender purchases injected ZiG32.8 billion of liquidity between January and early August, while government expenditure injected ZiG42.3 billion. Foreign currency sales and government revenue collections absorbed much of that liquidity, leaving an overall net injection of ZiG4 billion.

That liquidity management has helped preserve the monetary conditions within which lower lending rates become possible. It has not removed the structural constraints surrounding the currency. Zimbabwe remains some distance from the reserve levels the RBZ itself identifies as necessary for transition to exclusive local-currency use. Current reserves cover 1.7 months of imports, while the stated condition precedent requires a minimum of three months and ultimately up to six months. The central bank expects reserve cover to reach only 1.8 to two months by year end.

Local-currency usage also remains below the level targeted for the transition. ZiG transactions currently account for around 40% of activity on the National Payment System, with authorities targeting 60% in the medium term.

The RBZ’s own mono-currency barometer places overall progress on the eight conditions precedent at 50.1%. The central bank explicitly states that the score does not trigger an immediate currency transition and that migration remains market driven and conditional on sustained achievement of the prerequisites.

That leaves monetary policy with two interconnected tasks during the remainder of 2026. The stability accumulated since late 2024 has to survive continued expansion in deposits, government spending, export surrender purchases and credit. The banking system then has to determine how much of that stability can be converted into finance at rates capable of supporting productive investment.

The first task remains largely with the RBZ and fiscal authorities. The second increasingly reaches commercial bank balance sheets. The next evidence will come from lending-rate adjustments, productive-sector loan growth and utilisation of the Targeted Finance Facility. If borrowing costs decline while asset quality remains within current levels, monetary stability will begin transmitting more visibly into corporate financing conditions.

If lending rates remain elevated despite sustained low inflation, lower policy benchmarks and strong banking-sector capital, Zimbabwe will have achieved an important stage of monetary stabilisation while leaving a critical part of its economic transmission mechanism constrained.

The RBZ has spent much of the ZiG era proving that it can restrict the supply of money sufficiently to stabilise its value. The second half of 2026 begins a different test of the same framework. Stable money now has to become finance that productive businesses can afford to use.

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