HARARE – Zimbabwe’s gold-backed currency, the Zimbabwe Gold (ZiG), is projected to maintain stable inflation levels, with average month-on-month inflation forecast to remain below 3% in 2025.
This stability is attributed to stringent fiscal and monetary policies outlined in the 2025 National Budget presented by Finance, Economic Development, and Investment Promotion Minister, Professor Mthuli Ncube.
The budget, themed “Building Resilience for Sustained Economic Transformation,” emphasises single-digit inflation and a stable exchange rate as key pillars for fostering a favourable business environment.
“Any deviation from these assumptions, including the widening of the premium between the official and parallel markets, will severely impact macroeconomic stability,” warned Minister Ncube.
Stabilising Inflation and Exchange Rates
Since the introduction of the ZiG currency in April 2024, inflation rates showed initial improvement, with month-on-month ZiG inflation declining by 2.4% in May 2024 and averaging 0% in the second quarter. However, inflationary pressures resurged between August and October 2024, driven by heightened activity in the parallel foreign exchange market.
To address these challenges, the Monetary Policy Committee (MPC) implemented several measures, including:
- Raising the bank policy rate.
- Standardising statutory reserve requirements for deposits.
- Allowing greater exchange rate flexibility.
- Reducing the foreign exchange carry-out limit for individuals from US$10,000 to US$2,000.
These actions resulted in the local currency stabilising at an official exchange rate of US$1: ZiG25. Parallel market rates have also steadied.
“The monetary policy measures have begun to have a positive impact, as both the official and parallel exchange rates have stabilised,” said Minister Ncube.
Fiscal and Monetary Policy Integration
The government plans to use complementary fiscal and monetary tools to maintain currency stability and bolster the acceptance of ZiG. Measures include enhancing the efficiency of the willing buyer, and willing seller exchange rate system and monitoring market liquidity through the Liquidity Management Committee.
On the fiscal side, Minister Ncube emphasised aligning government expenditure with available resources while prioritising social and developmental spending. A comprehensive debt restructuring plan is also underway, complemented by domestic resource mobilisation initiatives, such as asset sales, to restore fiscal sustainability.
Vision 2030 and Sustainable Development Goals
The 2025 budget is designed to support Zimbabwe’s Vision 2030 objectives and align with the Sustainable Development Goals (SDGs). Minister Ncube highlighted the importance of macroeconomic stability for economic growth and development, stating:
“Restoring macroeconomic stability is critical for economic development and achieving our long-term goals.”
Social protection programmes will also receive heightened attention in the final quarter of 2024, albeit carefully managed to prevent inflationary pressures. Payments in November and December will be strategically handled to avoid injecting excess liquidity into the market, which could destabilise exchange rates and fuel inflation.
Future Outlook
Minister Ncube assured that the government and the Reserve Bank of Zimbabwe (RBZ) would remain vigilant, responding swiftly to emerging economic pressures to entrench stability. The focus on disciplined fiscal spending and responsive monetary policies is expected to create a robust foundation for sustained economic transformation in 2025 and beyond.