Online Reporter
Professor Mthuli Ncube
Over the past 12 months, the United States dollar has weakened significantly, with the dollar index falling by 8-9 percent against a basket of major currencies, its largest annual drop since 2017.
THE weakness continued into early 2026, with the greenback hitting four-year lows against major currencies amid investor uncertainty and geopolitical tensions.
The depreciation was mainly driven by the impact of tariff announcements and increased economic uncertainty; expectations of new Federal Reserve chairperson interest rate reduction (owing to Trump pressure); and slowing US growth prospects.
The US dollar depreciation has also contributed to a gold rally, with gold spot prices surging above US$5 000 per ounce, though recently highly volatile.
Impact on Zimbabwe
The impact of the US dollar depreciation has multi-layered implications on the Zimbabwean economy, particularly because Zimbabwe is a highly dollarised economy.
If Zimbabwe had the dominance of its local currency (as in South Africa or Botswana), the depreciation of the US dollar would lead to appreciation of the local currency, lower imported inflation and easing domestic inflationary pressures. The appreciated local currency would ordinarily have attrition on exports, while increasing imports, thus worsening the trade and current account balance.
In the case of Zimbabwe, because of the US dollar dominance — the greenback accounts for over 80 percent of economic activity in Zimbabwe — the implications of US dollar depreciation are on multiple levels, as summarised below:
Export growth
The US dollar depreciation may spur export growth for Zimbabwe, assuming that our exports respond to US dollar depreciation. This is particularly the case for Zimbabwe, reflecting the current gold price rally.
Zimbabwe’s gold exports were US$4,1 billion last year and projected to surpass US$4,55 billion this year, representing a 10 percent (double-digit) increase.
Imported inflation
The depreciation of the US dollar may lead to an increase in imported inflation, thus increasing domestic inflation pressures. However, this is likely to be muted in Zimbabwe, as the largest import bill — fuels — is already denominated in US dollars, and the same is true for most raw material imports.
Further, Zimbabwe imports as much as 38 percent of total imports from South Africa, which is currently experiencing pronounced inflation slowdown. The impact of US dollar depreciation on inflation in Zimbabwe is, therefore, likely muted.
Notably, a weaker US dollar may push commodity prices, including food prices, up, which may filter through as inflationary spillovers, but this is not likely to have significant impact on domestic inflation.
Beyond the near term, however, the greenback depreciation will lead to higher inflation in the US, which will lead to Federal Reserve response to control inflation through tighter monetary policy, and this, too, has implications on the global economy, including financing costs for developing economies, including Zimbabwe.
Record high gold prices
The record gold prices will benefit Zimbabwe.
Gold exports increased significantly to US$4,1 billion in 2025 and are projected to rise by a further 10 percent this year, reflecting both projected production increase and increase in gold prices.
The increase in gold prices will also assist Zimbabwe’s strategy for building foreign currency reserves to support the stability of the local currency (ZiG).
Already, the Government, through monetary authorities, has accumulated foreign currency reserves amounting to US$1,2 billion, and this will be sustained in 2026 and beyond.
The downside of a depreciating US dollar is that, in the near term, this may cause international commodity prices to boom (as happening with gold prices), including food prices, which may cause global inflation with spillover effects on Zimbabwe. This downside risk has marginal implications for Zimbabwe. However, the Government remains alert to address any possible inflation risks arising from the US dollar depreciation. Beyond the near term, however, higher inflation in the US will likely attract the Fed response through tighter monetary policy, which has implications for financing costs across the globe. Zimbabwe already has high US dollar financing costs due to domestic high charges and high US dollar interest rates.
The current depreciation of the US dollar will neither diminish nor impact immediately on the role of the greenback as an international reserve currency. The US dollar accounts for about 58 percent of the international reserves held by countries. Many countries are, however, diversifying their international foreign currency reserves, increasing holdings of gold.
Over the past 12 months, countries leading in gold accumulation include Poland, China, Uzbekistan, Turkey and Brazil. Zimbabwe will also increase gold holdings as part of its foreign currency reserves growth strategy.
Prof Mthuli Ncube is the Minister of Finance, Economic Development and Investment Promotion. He was responding to questions from The Sunday Mail’s Debra Matabvu.
Bongani Ndlovu