Zimbabwe could be entering a new era of cheaper and longer-term borrowing as the Government moves to leverage the country’s sharp decline in inflation to unlock affordable credit for businesses, farmers and households.
Finance, Economic Development and Investment Promotion Minister Professor Mthuli Ncube said the fall in annual inflation to a historic 2.9 percent had created room for interest rates to decline further, while giving banks greater confidence to provide long-term financing.
At the centre of the Government’s strategy is the development of a 15-year yield curve, which will provide a benchmark for pricing loans and investments over extended periods.
Prof Ncube said the initiative would help reduce the cost of capital and stimulate private-sector lending and investment.
“It means now our interest rates can come down sustainably. We can reduce the cost of capital over time going forward and increase lending to the private sector, to citizens and just in promoting investment in general. This is not a small issue,” he said.
The move comes as Zimbabwe’s benchmark policy rate stands at 30 percent following a reduction from 35 percent in June by the Reserve Bank of Zimbabwe. However, commercial lending rates remain significantly higher, ranging between about 43.95 percent and 46.54 percent.
Government believes a properly functioning long-term yield curve will help narrow the gap by allowing financial institutions to price credit more accurately and reduce the risks associated with long-term lending.
Prof Ncube said low and predictable inflation was particularly important in encouraging banks to extend the repayment period for loans.
“It also means that now companies can borrow long-term. Because once inflation is low and predictable going forward, you can borrow long-term.
“Banks don’t worry about whether they lose money or not in terms of pricing because they can price along a proper yield curve,” he explained.
A yield curve essentially shows the cost of borrowing money across different periods, providing a reference for lenders and investors when pricing one-year, five-year, 10-year or 15-year financing.
The development could have significant implications for productive sectors requiring substantial capital outlays, including manufacturing, mining, agriculture, energy, housing and infrastructure.
Unlike short-term loans that require frequent refinancing, long-term credit allows investors to spread repayment costs over several years while projects generate revenue.
Prof Ncube said he had directed officials in the Ministry’s Public Debt Department to accelerate work on extending the yield curve to 15 years.
“I was just speaking to our staff from the Debt Department to say we must speed up the development of this yield curve that goes into 15 years going forward and they are working on that,” he noted.
The initiative follows a dramatic improvement in Zimbabwe’s inflation environment after years of currency instability and rapid price increases that made long-term financial planning difficult.
Annual inflation fell to 2.9 percent by July 2026, marking a major shift from the extremely high inflation environment experienced in previous years.
Government and the Reserve Bank have attributed the improved macroeconomic environment to tighter fiscal and monetary policies and measures aimed at stabilising the currency.
The Government is also seeking to improve Zimbabwe’s investment appeal. Last month, the World Bank removed the country from its classification of fragile countries, a development authorities believe could help improve investor perceptions and reduce the risk premium attached to Zimbabwe.
Prof Ncube said the development was already strengthening the country’s investment proposition.
“This means a lot for Zimbabwe in the sense that now investors can confidently see Zimbabwe in a different light — a country that is free of fragility, institutional fragility,” he said.
He added that Zimbabwe was attracting interest in both foreign direct investment and its capital markets.
“We are attracting very good investment going forward, both foreign direct investment as well as investment into our capital market that is the Zimbabwe Stock Exchange, Victoria Falls Stock Exchange,” Prof Ncube said.
If sustained, the combination of low inflation, declining interest rates and deeper long-term capital markets could provide Zimbabwean businesses with greater capacity to expand, invest and create employment.
