Staff Writer 
THE current tight liquidity crunch is likely to persist as authorities seek to curb inflationary pressures, analysts say.
The country has experienced a significant depreciation of the local unit, primarily driven by both demand and supply factors which resulted in inflationary pressures.
Fiscal and monetary authorities have introduced measures to stabilise the economy on the back of mounting inflationary pressures and exchange rate volatility.
The unintended consequences of recent interventions by authorities to steady the ZiG and curb inflation have created a liquidity crunch that is now stifling economic growth.
Analysts at Morgan & Co said the current restrictive monetary policy has positively impacted the currency situation by somewhat stabilising parallel market rates and maintaining a narrow gap between the official and grey market rates.
“Going forward, we expect monetary authorities to maintain their stance on tight ZiG liquidity,” Morgan and Co said in a report.
“We also think that the outstanding obligations by fiscal authorities will likely be settled through debt instruments or a combination of ZiG and US$ payments that are tilted towards the latter as a way of supporting the central bank’s measures.
“That said, we do not rule out bursts of fiscal indiscipline throughout the year which will jolt parallel market rates and, by extension, ZiG inflation.”
The chief executive of the Zimbabwe National Chamber of Commerce (ZNCC), Chris Mugaga, described the country’s worsening liquidity squeeze as “quite damaging.”
“The ZiG is hard to come by, to the extent that some companies are failing to have their salaries in ZiG honoured on time because of the currency’s unavailability.
“The move by the Reserve Bank of Zimbabwe (RBZ) to push up interest rates and statutory reserve requirements to 30 percent can attest to some of the challenges which we are having, which is very sad. This is a big problem,” Mugaga said.
“This has further restricted the ability of banks to lend because most of the funds are at the central bank. As a counter-measure, the central bank then came up with that term facility which they introduced a few weeks ago.
“The monetary authorities are in a very tough position because it’s either they take an expansionary monetary policy position and increase lending, or they maintain a tight position like they are doing and control money supply and also liquidity.
“But the unintended consequences of the liquidity squeeze that we are having are quite damaging. The local currency is difficult to access,” Mugaga added.
An analyst at IH Securities, Vanessa Machingauta, said the current liquidity situation was being felt on the Zimbabwe Stock Exchange (ZSE).
“Concerning the ongoing current liquidity crunch, we have definitely seen some impact on the ZSE, with prices trending below the yearly average as of the end of December into the new year.
“Activity has been relatively subdued, and using our database, average daily trades fell nine percent quarter-on-quarter in real terms between the third quarter of 2024 and the fourth quarter,” she said.
SME Association of Zimbabwe chief executive, Farai Mutambanengwe, also bemoaned the gravity of the liquidity crisis.
“The liquidity challenge has been a severe problem for many businesses, particularly because it is emanating from the non-payment of suppliers by the government.
“What is happening is that the government is not paying suppliers or it’s paying them late. So, this affects their viability and their ability to meet commitments to workers and other suppliers, and ultimately impacts the whole economy,” he said.
Mutambanengwe further reiterated the urgent need for a market-determined exchange rate and timely payments by the government to stabilise the economy.
Financial analyst, Brian Nyakabawo, also highlighted how the liquidity crunch had negatively impacted the stock market.
Another economist, Stevenson Dhlamini, said the liquidity constraints have slowed sales growth, particularly for businesses reliant on local currency.
While recognising the importance of stabilising inflation and exchange rates, he cautioned against overtightening policies, advocating for a balanced approach that would stimulate production and support economic growth.
However, the RBZ’s deputy governor, Innocent Matshe, defended the central bank’s measures — citing successes in stabilising the local currency and prices.
“In 2024, the reserve bank walked the talk on sound monetary policy, achieving relative price and currency stability.
“The ZiG currency has been fully backed by foreign reserves since April, and the economy has shown resilience.
“The anticipated rebound in economic growth from two percent in 2024 to six percent in 2025 will support optimal monetary policy management and further entrench stability,” Matshe said.
