RBZ Warns Fiscal Gridlocks Could Threaten Monetary Stability

The Reserve Bank of Zimbabwe has warned that government cash-flow challenges could threaten monetary and price stability, cautioning that weak fiscal coordination risks undermining gains made under recent economic reforms (image source)

HARARE — Zimbabwe’s central bank has issued a stark warning that mounting government cash-flow challenges could undermine hard-won monetary and price stability if not urgently addressed, exposing a critical fault line between fiscal stress and economic recovery.

The caution is contained in the Reserve Bank of Zimbabwe’s (RBZ) five-year strategic plan (2026–2030), where the bank stresses that even with a contained fiscal deficit, liquidity pressures within government remain a major risk. “Although the fiscal deficit is contained, government cash-flow challenges require strong collaboration with the Reserve Bank to avoid destabilising monetary and price stability,” the RBZ said.

The warning comes as the central bank pursues an ambitious plan to build a US$6 billion foreign exchange reserve buffer by 2030. The reserves are intended to anchor confidence, stabilise prices and protect the gold-backed ZiG currency introduced in 2024. RBZ Governor John Mushayavanhu said reforms over the past 20 months had delivered relative stability, but unresolved fiscal pressures continued to cast a long shadow over those gains.

The concerns coincide with government’s admission that at least 226 public projects stalled in 2025 after funds ran out. Authorities have since announced a US$500 million package to complete selected “high-impact” projects. Analysts say the RBZ’s language signals more than routine caution. “It is one of the most under-reported macroeconomic red flags in the current cycle,” said Trade Winds economist Tapiwa Sibanda.

Economists warn that unmanaged cash-flow stress risks pushing the state back into familiar patterns, including delayed payments, accumulation of arrears, pressure on banks and destabilising monetary interventions. Contractors have already felt the impact. In 2025, unpaid government invoices pushed several firms into bankruptcy, court disputes and asset seizures. The Zimbabwe Building Contractors Association (ZBCA) said dozens of companies were crippled by the state’s failure to honour obligations, with some business owners losing personal property to creditors.

Despite these challenges, the RBZ has moved aggressively to rebuild economic buffers. Zimbabwe recorded a US$1 billion current account surplus in 2025, generated US$16,2 billion in foreign-currency receipts and increased official reserves to US$1,2 billion, equivalent to 1,5 months of import cover. When Mushayavanhu assumed office in April 2024, reserves stood at just US$276 million.

The central bank now targets reserves of US$6 billion by 2030, a level it believes is critical to underpin price stability and restore long-term confidence. However, the message beneath the optimism is clear. Analysts say that without fiscal discipline that goes beyond headline deficits to include effective cash management, the gains could prove short-lived. The warning underscores the need for tighter coordination between Treasury and the RBZ, as history shows that when this fiscal-monetary fault line cracks in Zimbabwe, the consequences are swift and severe.