Online Reporter
Africa Moyo-Deputy National Editor
ZIMBABWE has attained an economic milestone in price stability in the local currency, Zimbabwe Gold, with year-on-year inflation falling into single digits, hitting 4,1 percent this January for the first time since 1997.
Equally, the United States dollar annual inflation has also drastically declined to 1 percent as of this January, marking a crucial milestone towards durable macroeconomic stability, critical for sustainable economic growth and the achievement of Vision 2030 of a prosperous and empowered upper middle-income society.
The decline in inflation to single digits has been driven largely by the robust policies introduced by the Second Republic under the leadership of President Mnangagwa since late 2017.
In a statement yesterday, Finance, Economic Development and Investment Promotion Minister Professor Mthuli Ncube said the attainment of single-digit inflation is “a historic milestone for Zimbabwe after nearly three decades since the country recorded single-digit inflation in domestic currency”.
“This is a result of concerted and consistent efforts by the Ministry of Finance, Economic Development and Investment Promotion and the Reserve Bank of Zimbabwe through the implementation of complementary fiscal and monetary policies,” he said.
“Implementation of prudent fiscal policy over the past few years, and complementary monetary policy, since the introduction of ZiG in April 2024, has resulted in macroeconomic stability.”
The ZiG is backed by gold and foreign currency reserves. Both reserve money and broad money are fully covered by foreign currency reserves.
Prof Ncube said the Government has managed to accumulate foreign assets reserves backing the ZiG from about US$276 million in April 2024 to US$1,2 billion by the end of December last year.
The prices of most consumer goods such as bread, mealie meal, detergents, beef, tea, milk, lotions and other essentials have barely changed in the past 12 months.
Prof Ncube said price stability is important for both business and citizens.
“For citizens, stable prices preserve buying power of incomes and protect savings. For business, it enables long term planning, reduces operational costs and enhances profitability.
“This also eliminates opportunities for arbitrage and speculation which distorts the macro-economic environment. In addition, stability promotes national savings and investment and attracts foreign direct investment, which are essential for creating jobs and growing the economy,” he said.
Price stability implies low and stable inflation, typically single digit inflation.
Last year, Prof Ncube said he was optimistic that by the end of the first quarter of this year, single digit inflation would have been achieved, since it was one of the Government’s main objectives.
The challenge now is to maintain the milestone for the year and beyond, as part of the macro-economic stabilisation framework.
Prof Ncube challenged the people of Zimbabwe to have confidence and accept the ZiG as it preserves value and is an acceptable medium of exchange.
“Businesses and investors can now implement their long-term plans with certainty,” he said.
“Zimbabwe is now aligned with the SADC Macro-economic Convergence Primary Benchmarks namely, budget deficit, current account deficit and inflation (target range of 3-7 percent).”
Going forward, Prof Ncube said the Government commits to entrench price stability through continued implementation of well coordinated monetary and fiscal policies, which is critical for the attainment of Vision 2030, as well as compliance with regional and international commitments.
“To further guarantee the stability going forward, there is also need for all stakeholders, particularly business and labour, to work closely with Government to entrench stability.
“Specifically, business should exercise restraint in price setting, while workers should align their salary adjustments requests to inflation developments.
“On our part as Government, we have pegged salaries of civil servants to USD, therefore changes in exchange rate and inflation are embedded,” he said.
In an interview yesterday, economist and Monetary Policy Committee member Mr Persistence Gwanyanya said the country recorded the ZiG annual inflation of 4,1 percent this January because the local currency is entrenching its stability.
“Commendably, this the first time we recorded single digit local currency inflation since 1997. ZiG performance largely reflects exchange rate stability, which we have been enjoying for more than a year now.
“This stability is typified by the narrowing currency premiums from more than 140 percent prior to the introduction of ZiG in May 2024 to around 20 percent currently.
“Importantly, January inflation outturn reflects the complementarity of fiscal and monetary policies.
“On the fiscal front, prudent fiscal policy measures by Treasury have seen budget deficits maintained below 3 percent since 2018, when we embarked on economic reforms,” he said.
Mr Gwanyanya added that despite the fiscal pressures, typified by high arrears to creditors, the budget deficit is expected to continue under control at 0,2 percent this year.
“This, supported by prudent monetary policies from monetary authorities, is expected to anchor single digit inflation in 2026 and beyond,” he said.
