KEY POINTS
- Bank executive criticizes RBZ policies for stifling productive lending.
- High statutory reserve requirements reduce banks’ lending capacity.
- Tight measures maintain exchange rate stability but risk long-term growth.
A senior banking executive in Zimbabwe has criticized the Reserve Bank of Zimbabwe’s (RBZ) recent monetary policies, arguing that they prioritize exchange rate stability over economic growth.
Speaking anonymously, the bank manager in Bulawayo explained that the RBZ’s high statutory reserve requirements are limiting banks’ ability to lend to productive sectors, impacting economic activity.
In September, the RBZ devalued the ZWG currency to bridge the gap between official and parallel exchange rates.
Additional measures included raising statutory reserves for savings and time deposits from 5 percent to 15 percent, a move the bank official described as counterproductive.
“The focus of the RBZ is on exchange rate stability, but it’s left us struggling to meet client demands,” he stated.
Statutory reserves limit banks’ resources
The executive highlighted the practical impact of RBZ’s reserve policy, noting that increased reserve requirements reduce available funds for banks, restricting their ability to lend effectively.
He pointed to a recent RBZ offer of $25 million for local banks, adding that few institutions could utilize it due to the constraints imposed by mandatory reserve deposits.
“Where does the central bank expect us to get the money from?” the executive questioned, pointing out that high reserve demands leave banks with limited resources to support essential lending activities.
According to New Zimbabwe, he described the policy as “taking more from us with one hand and offering funds with the other,” which he said creates a strained banking environment.
Long-term risks of restricted productive lending
According to the banking executive, the central bank’s tight policies could create long-term economic risks, as they discourage lending to sectors that drive growth.
While the measures have brought temporary exchange rate stability, he questioned whether this comes at the expense of economic development.
“Monetary authorities need to consider the repercussions of these measures on productive lending,” he said.
The executive warned that restricting lending weakens the financial sector’s capacity to support businesses and job creation, urging the RBZ to balance exchange rate stability with sustainable growth.
