Updated Jul 27, 2023, 1:01pm EDT

Zimbabwe’s central bank reforms seen as unsustainable as president readies for election

Reuters/Philimon Bulawayo

Sign up for Semafor Africa: A rapidly-growing continent’s crucial stories. Read it now.

Title icon

The News

HARARE, Zimbabwe — Zimbabwean President Emerson Mnangagwa is whittling down the powers of the central bank governor and handing over notable monetary controls to the finance minister.

This is in an attempt to get to grips with the country’s ballooning debt and excess money supply ahead of a presidential election on Aug. 23 but at a long term risk to the economy and the bank’s ability to carry out its mandate independent of political and executive interference, said economists.

Under the watch of Governor John Mangudya, the Zimbabwean central bank has run up a debt of $4.2 billion — most of it owed to suppliers of commodities such as fuel, grain and electricity — in a bid to prop up the struggling economy. Mnangagwa, who is keeping an eye on Zimbabwe’s $12 billion in total external debt, has now put in place legal limitations on the powers of the Reserve Bank of Zimbabwe from borrowing in foreign currency. The changes were announced in a legal gazette earlier this month.

Title icon

Know More

The International Monetary Fund (IMF) told Semafor Africa it supports some of the new measures that Zimbabwe put in place earlier this month as it tries to refocus the central bank. In an emailed statement, the IMF said it welcomes Zimbabwe’s moves to transfer the Reserve Bank of Zimbabwe (RBZ) external loans to the government, highlighting that this “would contribute to reducing” the reserve bank’s overlap into non-monetary operations such as creating excess local liquidity. “Stepped-up efforts to overhaul the RBZ Act would significantly enhance the RBZ’s operational independence,” noted the IMF.

Title icon

Tawanda’s view

The poor state of the economy, particularly runaway inflation and sustained weakness in the value of the local currency, is taking center stage ahead of the Zimbabwean election, in which Mnangagwa is facing off against Nelson Chamisa, leader of the country’s biggest opposition, among other contenders.


With Mnangagwa moving to institute some reforms at the central bank, including a drastic reduction in the money supply, there have been difficulties in the ability of companies and locals to access local currency. This could be the pain that Zimbabweans have to go through but there are already doubts over the long term effectiveness of the measures, given the impact of a liquidity squeeze on companies and ordinary citizens. It could add to the economic misery and uncertainty ordinary Zimbabweans have had to contend with for the last 20 years of a financial crisis and periodic hyperinflation.

After easing off some of the exchange control mechanisms by the central bank by allowing banks to participate in determining exchange rate through a willing buyer willing seller platform, the Zimbabwe dollar has firmed up by about 53% in the past month while inflation has eased down to 101% in July from 176% in June.

Former finance minister Tendai Biti, who is a key ally and leader in Chamisa’s Citizens Coalition for Change, insists that there is a need for “real structural reforms” including enactment of “laws to limit government borrowing, central bank reforms” and scrapping of the weekly foreign exchange auction.

Another economist, Trust Chikohora, who is also an independent presidential candidate in the upcoming election, told Semafor Africa that the legal moves by Mnangagwa are “intended to put more control and discipline on the manner in which borrowings are undertaken” by the central bank.

With the economic difficulties best captured by the elevated inflation and with depressed disposable incomes taking center stage ahead of the elections, Mnangagwa will be hoping that these new monetary measures will sway voters in his favor. However, he may find this is too little too late.

Title icon

Room for Disagreement

Batanai Matsika, economic analyst at Harare-based Mark & Associates Consulting Group, said it was important for Zimbabwe to have a deeper look at the “long term drivers of inflation” which include government spending.

“Price levels are always determined by the supply of money in the economy through government expenditure and currently the Zimbabwe government is not spending. This means that the current situation of falling inflation and stability in exchange rate is not sustainable and is a managed scenario as there is still that room for the government to ramp up its expenditure,” he told Semafor Africa.

Title icon

The View From Lagos

By curbing borrowing powers of the central bank and forcing the governor’s hands off exchange rate controls, Zimbabwe’s Mnangagwa is falling short of the wider reforms instituted by Nigerian President Bola Tinubu who, since taking office in late May, has urged the Central Bank of Nigeria to move to a single exchange rate, ending its complex system of multiple rates.

Gbemisola Joel-Osoba, the global policy economist at the ONE Campaign, said Nigeria’s foreign exchange market reforms had “restored transparency in the market and boosted investor confidence with positive reactions” from the capital market.“One thing that Zimbabwe can learn from Nigeria is the discontinuation of a fixed exchange rate regime which had stifled foreign capital inflows,” she said.

Title icon


  • The U.S. dollar is still in much demand in Zimbabwe despite the Zimbabwean dollar’s 53% rally so far this year, writes Bloomberg.