Persistence Gwanyanya
As stability entrenches, Zimbabwe recorded ZiG annual inflation of 4,1 percent in January 2026.
This is the first time Zimbabwe registered single-digit domestic currency inflation since 1997, which attests to the determination by monetary authorities to pin down the adversary since the introduction of ZimGold (ZiG) in April 2024.
Importantly, the local currency’s performance largely reflects exchange rate stability, which the country has been enjoying for more than a year now.
This stability is typified by the narrowing parallel market premiums from more than 140 percent prior to ZiG’s introduction to around 20 percent for the greater part of 2025 and now.
It does not need an economist to tell the world that ZiG is now stable.
Stability is a lived experience.
The price of standard loaf of bread has remained within the price range of ZiG31-ZiG33 (US$1) for more than a year now.
Similarly, the price of Coke (330ml) has slightly increased from ZiG10 a year ago to ZiG10,5 in January, whilst the cost of a pint of alcoholic beverages (375 ml) has slightly increased from ZiG27 to ZiG27,9 over the same period, partly reflecting the increase in value-added tax (VAT) from 15 to 15,5 percent effective from the beginning of 2026.
The drop in inflation is noticeable in the slowdown in the increase of prices of almost all goods and services in the domestic economy.
Whilst the drop does not mean a reduction in prices but a slowdown in the rate of increase of the same, the relief from falling inflation is plainly visible.
For a country that went through hyperinflation, stability is easily noticeable.
Whilst the trauma of hyperinflation is generally difficult to cure, permanent stability is seen as a critical medicine for the same.
As stability entrenches, pressure by market participants to dispose of ZiG at every opportunity is evidently easing.
ZiG is now increasingly acceptable for transactions and as a store of value.
Permanent stability
Interestingly, as the economy transitions to permanent stability, ZiG is experiencing the restoration key characteristics of money.
Besides being increasingly acceptable as a store of value, lending in ZiG is no longer as risky as before.
Permanent stability is expected to take away the burden of expectation to comply with reporting under hyperinflation.
Importantly, financial planning has been made easy with the promise of durable stability.
Comfortingly, after close to three decades, monetary conditions are normalising.
Now, the key challenge is to sustain this disinflation path.
As indicated earlier, due to high positive correlation between currency and price stability in Zimbabwe, maintaining exchange rate stability is key to sustaining price stability.
Reserve Bank of Zimbabwe (RBZ)’s reserve accumulation strategy is seen as supporting exchange rate stability.
On account of this strategy, our foreign reserves increased from US$276 million in April 2024 to US$1,2 billion by December 2025.
At this level, the reserves provide about six times (6x) reserve cover, and more importantly now, about 1.5x import cover.
In a multi-currency regime, the reserves cover, which is the extent to which ZiG reserve money is backed by foreign reserves (precious minerals, mainly gold; and forex), is a more reliable indicator of convertibility of the domestic currency.
Put simply, reserve money (Mo) is the usable money balances in the economy.
It is most liquid and readily available money balances in the economy comprising notes and coins in issue, balances which the banks are required to keep with RBZ (statutory reserves), as well as money kept by banks on the RTG platform (excess reserves) to facilitate daily transactions.
This amount was largely maintained around ZiG4 billion-ZiG5 billion (US$150 million-US$190 million) for the greater part of 2025 through a tight monetary policy stance.
Total money supply (M3), which includes savings and term deposits, was maintained at around ZiG15 billion-ZiG18 billion (US$577 million-US$692 million) for the greater part of 2025, which is way lower than the total foreign reserves of US$1,2 billion as at December 31, 2025.
Simply put, with the current foreign reserves, RBZ is able to buy total ZiG money supply in the economy.
Monetary authorities maintained a tight monetary policy stance through an aggressive interest rate policy, statutory reserve ratio and open market operation (OMO) to mop up excess liquidity.
Since September 27, 2024, RBZ maintained ZiG interest rate policy at 35 percent to discourage speculative and consumptive borrowing.
Similarly, the sharp reserve ratio requirements of 30 percent and 15 percent for demand and savings, as well as term deposits, respectively, support the tight monetary policy stance.
Importantly, the central bank has been actively mopping up excess liquidity in the economy using non-negotiable certificates of deposits (NNCD), thus limiting growth in money supply.
Prudent fiscal policy is supporting the monetary policy stance.
Reflecting commitment to fiscal consolidation, Treasury managed budget deficit at below 3 percent since 2018 when the country embarked on economic reforms under the auspices of Vision 2030.
Resultantly, we have not experienced incidences of monetisation of fiscal deficits since the introduction of ZiG.
Unsurprisingly, broad money supply growth was managed below 2 percent in 2025 from more than 10 in previous years.
As already indicated by Treasury, there is urgent need to address mounting arrears to creditors, which pose risk to fiscal sustenance.
Treasury has already taken measures to address outstanding arrears, including a five-year plan to pay arrears of around US$1,3 billion over the next five years to 2030, minimising incidences of over-contracting by ministries, departments and agencies (MDAs) and implementation of a Public Finance Management System (PFMS) that harmonises budget release and cash release to minimise incidences of arrears.
Going forward, strong real sector performance is expected to anchor durable stability.
After growing by 6,6 percent in 2025, Zimbabwe’s economy is projected to grow by 5 percent in 2026.
We have been receiving above-average rains throughout the country, which supports projected agriculture sector growth of 5,4 percent this year.
The mining and quarrying sector projection of 6,3 percent is supported by firming gold prices as well as recovery in platinum.
Increased investment in key minerals such as gold, platinum, lithium, chrome and coal firmly supports the projected growth for 2026 and beyond.
The boom in construction is evident, with the current infrastructure drive and housing construction supporting projected growth of 5 percent in 2026.
All other key sectors such as manufacturing (3,7 percent), tourism (3,1 percent), electricity (6,5 percent) and wholesale and retail (7,4 percent) are expected to register growth.
Strong real sector growth as well as increased support from the diaspora community is seen as driving growth in foreign currency inflows.
The country recorded historic growth in foreign currency inflows to US$16,2 billion in 2025.
Continued growth of the external sector is envisaged as the gold rally and platinum price recovery is expected to continue, driving export growth.
Improved performance of gold; platinum group minerals (PGMs); and other precious minerals will support RBZ’s reserve accumulation strategy.
Half of the royalties from these minerals is now payable in physical form.
Similarly, inflows from diaspora remittance are expected to grow to US$2,8 billion in 2026, which is important to liquify the economy.
Easing monetary policy
Admittedly, the expectations of the market is for monetary authorities to ease the monetary policy stance, in line with the decrease in annual inflation, both current and projected.
Monetary authorities project inflation of 3-7 percent for the rest of the year.
However, as indicated by RBZ, monetary authorities all over the world are overly cautious about loosening the monetary policy.
They are normally concerned about how well inflation is durably anchored before they consider loosening the monetary policy.
Even when they loosen, they normally do it gradually.
In our case, factors which will durably anchor inflation include guaranteed ZiG convertibility, wide use, circulation and acceptance of ZiG, especially by Government, enhanced fiscal discipline, reduced informalisation and effective implementation of ease of doing business reforms.
Considerations about supporting growth will be key, especially now when some businesses are showing signs of stress.
Whilst some market analysts prefer to call this scenario shrinkflation, l prefer to call it “right-sizing”.
As volatility-driven growth is evidently vanishing, businesses have to right-size.
Right-sizing of the economy may call for businesses to review their models and develop new sources of competitiveness.
They have to be more competitive and deliver unique customer experience by emphasising value for money.
To survive in the new environment, there is need to deliver quality products that meet customer expectations.
Persistence Gwanyanya is an economist, trade finance specialist and member of the RBZ Monetary Policy Committee. He is also the founder of Bullion Group International, who writes in his personal capacity. For feedback, email: persgwa@bulliongroup.co.zw
