
HARARE – Zimbabwe’s central bank has vowed to maintain a stringent monetary policy throughout 2025 to stabilise the nation’s struggling currency, which has depreciated by 48% since its introduction nine months ago.
The Reserve Bank of Zimbabwe (RBZ) Governor, John Mushayavanhu, stated that high interest rates would be a key tool in curbing inflation and supporting the embattled Zimbabwe Gold-backed currency (ZiG). The bank aims to sustain month-on-month inflation at single-digit levels, which have already dropped significantly from 37.2% in October to 3.7% in December 2024.
“The forthcoming 2025 Monetary Policy Statement will further contextualise and consolidate these positive prospects, providing fine-tuned policies to transition the economy from stability to growth,” Mushayavanhu said in a written statement.
Currency Challenges Persist
The ZiG, Zimbabwe’s latest attempt at a local currency, has struggled to gain traction amid a history of economic mismanagement that has undermined five prior efforts. The US dollar remains the preferred medium of exchange for most Zimbabweans, accounting for approximately 90% of all transactions, as it provides a more reliable store of value.
To support the struggling currency, the RBZ has raised its key interest rate to 35%, aiming to contain inflation and instil confidence in the monetary system.
Economic Growth Projections and Policy Initiatives
Zimbabwe’s Treasury projects a 6% economic growth rate for 2025, driven by recovery in agriculture and expansion in the iron and steel industries. To bolster this growth, the central bank has introduced the Targeted Finance Facility (TFF), a special-purpose vehicle designed to finance productive sectors without exacerbating inflationary pressures.
“The TFF will be financed from banks’ statutory reserves held at the Reserve Bank, ensuring that no new money is created, unlike past practices,” Mushayavanhu explained.
Increasing ZiG Usage
The central bank is actively working to enhance the use of ZiG in both physical and electronic forms, aiming to increase its acceptance and convenience among the public. Currently, ZiG accounts for 40% of transactions processed through the Real Time Gross Settlement (RTGS) system.
Mushayavanhu emphasised that the TFF would also serve as a liquidity management tool, encouraging banks to extend credit to productive sectors and stimulate economic growth.
Outlook and Challenges
While the government remains optimistic about its economic strategy, critics point to the deep-rooted challenges facing the currency and broader fiscal policies. Many Zimbabweans remain sceptical about the ZiG’s viability, with widespread reliance on the US dollar illustrating a lack of public trust in the local currency.
The RBZ’s efforts to stabilise the economy and encourage the adoption of ZiG will face significant hurdles as the nation grapples with a legacy of hyperinflation, currency instability, and external shocks.