Zimbabwe’s inflation trajectory in 2025 marked a decisive shift from the volatility of recent years, reflecting the cumulative gains of fiscal restraint, tight monetary policy and more proactive money supply management.
After a period of elevated price pressures in early 2025, inflation indicators steadily improved, reinforcing confidence in the authorities’ stabilisation framework and laying the groundwork for further disinflation in 2026.
Monthly inflation in ZiG terms remained largely contained throughout most of the year, between February and October 2025, month-on-month ZiG inflation averaged about 0,4 percent, signalling relative price stability across the economy.
This consistency has been widely interpreted as evidence that inflation expectations and fears of rapid exchange rate depreciation have been firmly anchored.
Economist Tinevimbo Shava said the low and stable monthly inflation readings were critical in rebuilding confidence.
“What matters most for households and businesses is predictability. When month-on-month inflation stays close to zero, it changes behaviour, from pricing decisions to wage negotiations,” Mr Shava said. “That is what we have increasingly seen in 2025.”
On an annual basis, the improvement has been even more striking. ZiG inflation, which stood at 85,7 percent in April 2025, climbed to a peak of 95,8 percent in July before decelerating sharply to 32,7 percent by October.
Authorities project that annual inflation will fall to around 20 percent by December 2025.
This rapid disinflation has been underpinned by a combination of factors, chief among them the sustained tight monetary policy stance adopted since September 2024. Liquidity control measures, complemented by exchange rate management and currency reforms, have reduced excess money supply growth and dampened speculative activity.
Mr Shava noted that the policy consistency itself has been as important as the measures.
“The difference this time is follow-through. The market has seen that tight policy is not temporary, and that credibility has helped to compress inflation faster than many expected,” he said.
Improved domestic food supply has also played a significant role. A favourable 2024/25 agricultural season boosted output, easing food price pressures that traditionally account for a large share of Zimbabwe’s inflation basket.
This supply-side relief coincided with better foreign currency availability, further reinforcing price stability.
The Reserve Bank of Zimbabwe’s liquidity management tools have been central to the disinflation process. The continued implementation of tight monetary policy was reinforced during the Mid-Term Monetary Policy Review, notably through the deployment of Non-Negotiable Certificates of Deposit (NNCDs) to mop up excess liquidity.
Economic analyst Namatai Maeresera said these instruments helped close loopholes that previously fuelled inflation.
“Liquidity leakages have historically undermined policy efforts. Through tightening control over money supply growth, the central bank has reduced arbitrage opportunities that fed both inflation and exchange rate instability,” Mr Maeresera said.
He added that the impact of these measures was visible not only in inflation data but also in the behaviour of the exchange rate.
“Once the exchange rate stabilises, inflation follows. The two are inseparable in Zimbabwe’s context,” he said.
Indeed, the exchange rate has remained relatively stable on the Willing Buyer Willing Seller market since September 2024. Supported by steady foreign currency inflows and tight liquidity conditions, the interbank exchange rate averaged ZiG26,69 per US dollar between January and September 2025, closing September at ZiG26.64.
As a result, the parallel market premium narrowed significantly, falling from above 36 percent in January 2025 to about 20 percent by the end of September.
The Reserve Bank’s accumulation of foreign currency reserves enabled targeted interventions to smooth supply-demand mismatches without undermining broader market discipline.
Zimbabwe’s external sector performance in 2025 has provided additional support to price and exchange rate stability. Between January and September, total foreign currency receipts rose to US$11,9 billion, up from US$9,6 billion during the same period in 2024, representing a 24 percent increase.
Export proceeds led the growth, rising nearly 29 percent to US$7,04 billion, driven largely by tobacco, gold and platinum.
Diaspora remittances also increased, while private sector loan inflows surged by more than 55 percent, reflecting improved confidence and access to external financing.
Banker Raymond Madziva said the scale and diversity of inflows had helped to stabilise the macroeconomic environment.
“When foreign currency supply improves across exports, remittances and financing, it reduces pressure on the exchange rate and dampens imported inflation,” Mr Madziva said. “That virtuous cycle has been evident in 2025.”
However, he cautioned that some inflows, such as foreign direct investment, declined during the period, highlighting the need to deepen reforms that attract long-term capital.
“Stability is a necessary condition, but not sufficient on its own. Structural reforms will determine whether these gains are sustained,” Mr Madziva added.
Inflation trends in US dollar terms have also remained subdued. Month-on-month US dollar inflation averaged just 0,1 percent between February and October 2025, while annual US dollar inflation averaged 14,2 percent.
This reflects the combined effects of exchange rate stability and moderated domestic price pressures.
According to Mr Maeresera, the deceleration in both ZiG and US dollar inflation suggests broad-based stability.
“It shows that inflation is not merely being suppressed in one currency while re-emerging in another. That balance is critical for confidence in pricing and contracts,” he said.
With inflation decelerating steadily in 2025, attention is turning to the outlook for 2026. Authorities project that ZiG annual inflation will decline further, reaching single-digit levels, with an average rate of about 12,1 percent for the year.
This outlook is anchored on sustained fiscal discipline, continued tight monetary policy and stronger co-ordination between fiscal and monetary authorities.
Mr Shava said the projections were achievable but not guaranteed. “The direction is encouraging, but policy discipline must be maintained. Any slippage on fiscal spending or liquidity control could quickly reverse the gains,” he said.
Mr Madziva echoed this view, adding that external shocks remain a risk. “Commodity prices, climate-related shocks and global financial conditions will matter. The key will be how policy responds to these pressures without sacrificing stability,” he said.
Overall, Zimbabwe’s 2025 inflation performance represents a turning point. Sustained deceleration in prices, improved exchange rate stability and stronger external inflows have created a more predictable macroeconomic environment.
If current policies are maintained, 2026 could mark the transition from stabilisation to sustained low inflation and broader economic recovery.-hrald
