Zim marching towards durable price stability — CZI

Golden Sibanda

Business News Editor

ZIMBABWE has made huge strides towards durable ZiG price stability, the Confederation of Zimbabwe Industries (CZI) has said, with the central bank keeping inflation below 1 percent since February.

The ZiG month-on-month inflation slightly decreased to 0,3 percent in June from 0,9 percent recorded in May, Zimbabwe’s most influential industrial lobby noted in its Currency and Inflation Developments report released earlier this month.

The Reserve Bank of Zimbabwe (RBZ) is targeting a monthly inflation rate of below 3 percent for 2025, consistent with exchange rate stability.

The target is part of the central bank’s broader strategy to maintain price stability in Zimbabwe’s multi-currency environment.

CZI said the low monthly inflation trend was critical to engender renewed market confidence in the domestic unit of account.

“The prolonged period of inflation at rates below 1 percent since February generally reflects a ZiG price-stabilising economy.

“In addition, this may also indicate the success of monetary policy in restoring price discipline as compared to past experiences with the Zimbabwean dollar,” CZI said.

The central bank announced last week that it now holds more than US$731 million in foreign currency reserves backing the domestic unit, as of June 25, 2025.

It said the foreign currency reserves, equivalent to ZiG19,67 billion, were enough to cover all the ZiG reserve money of ZiG4,7 billion and the entire local currency deposits of ZiG17,3 billion.

“The foreign reserves were enough to cover both ZiG reserve money and the entire stock of ZiG deposits as at end-June 2025. The build-up of foreign currency reserves is critical for the lasting stability of the ZiG currency,” the RBZ said in its second quarter snapshot on monetary, currency, price and financial developments last week.

Complemented by a tight monetary and fiscal policy stance, the ZiG has remained largely stable since its introduction in April last year, resulting in a marked drop in the premium between the parallel market and official exchange rates.

Consequently, the parallel market premium has narrowed from 100 percent in September last year to about 28 percent presently, largely due to the tight monetary policy stance of the RBZ.

The bank noted in the economic update that the low and stable monthly inflation is partly a result of the tight monetary policy stance of the Reserve Bank.

CZI said the low levels of inflation would help build trust in the local currency and also encourage greater usage of ZiG in transactions. “This could also boost the likelihood of a gradual de-dollarisation process leading to a ZiG monocurrency regime by 2030,” CZI said.

According to the central bank, since February 2025, the ZiG monthly inflation has averaged 0,5 percent, supported by the relative stability of the ZiG/US dollar exchange rate.

The ZiG year-on-year inflation rate slightly increased to settle at 92,5 percent in June, the industrial lobby group noted, after gaining 0,4 percentage points from 92,1 percent recorded in May 2025.

CZI, however, said that while the month-on-month inflation had shown that price increases were currently under control, the high annual inflation rate reflected historical price instability legacies whose effects were still at play.

“Therefore, sustaining month-on-month inflation at the current low rates is crucial for eliminating this high annual inflation, which is expected to only start falling in October 2025.

“Only then will restoring confidence in the ZiG, protecting real incomes, and supporting sustainable economic recovery become more realistic,” CZI said.

Similarly, Zimbabwe’s US dollar inflation remains low despite slightly increasing to minus 0,2 percent in June 2025, gaining from minus 0,3 percent in May 2025.

“A negative US dollar month-on-month inflation is critical to reducing US dollar annual inflation, which is still high for a dollarised economy like Zimbabwe.

RBZ Monetary Policy Committee member and economist Mr Persistence Gwanyanya said the central bank would not relent on its tight monetary policy stance to ensure macroeconomic stability, drive growth and build market confidence.

“We see the monetary policy stance as sustainable in that, where we are coming from, we need demonstration of seriousness and commitment to the policy stance and resist all temptations to look back.

“We have maintained a tight monetary policy stance, which is necessary to maintain stability and given that we had now gotten used to policy relapse in the past, the expectation was, the market one, it was going to be temporary,” he said.

Mr Gwanyanya said the market was beginning to realise that the central bank was serious and the tight monetary policy stance would be maintained for as long as is necessary.

“That’s important to build credibility; that’s important to build a track record, which is important to sustain currency stability,” he said, noting that while it will not be easy to achieve the desired results, the bank will stay its course to achieve its objectives

Mr Gwanyanya said the monetary authorities needed to demonstrate to the people that they were committed to the current policy stance and that it worked.

“Stability is a key variable in the economy today, in that it can affect all other macroeconomic variables. Growth is only sustained in a stable environment. We now know better that volatility-driven is not sustainable; it will subside at some point.

He also said it was important to maintain the prevailing stability for the country to achieve its targeted growth of 6 percent this year, following the muted growth last year due to the negative impact of the  El Nino-induced drought.

“Stability-driven growth is quality growth that can be sustained. So, stability is a precondition, especially in our case, as Zimbabwe, but it is also important to build confidence, which derives from the track record that we are building in the economy.

“Yes, it may seem tough, but we see that as having the results that we want as a country.

“As a central bank, we have done quite a lot and we continue to do a lot to support stability, including building reserves to support the structured nature of our currency.

“But even the economic variables are improving; our inflows of foreign currency and the current account position are improving, and we see that as benefiting stability, the growth in the economy itself as well, will benefit the stability that we want.”