- Current Exchange Rate Trends: As of January 10, 2025, the local currency trades at 26.0579 ZWG per USD, reflecting a 0.9% depreciation from the January 2 opening rate
- Projected Depreciation: Gvt projects a 52% depreciation of the local currency which could lead to rates exceeding 55 ZWG per USD by year-end
- Economic Instability and Inflation Risks: The significant increase in money supply and anticipated economic deterioration may exacerbate exchange rate volatility and inflation
Harare- During the close of the second week of January 2025 (10/01/2025), the local currency has traded at an exchange rate of 26.0579 against the US dollar, reflecting a slight depreciation from the opening rate of 25.8267 observed on January 2, 2025.
This represents a marginal decline of 0.9%.
This is against a parallel market rate of up to 45 per dollar, nd peer to peer ranging from 38-40 per dollar.
This brings a premium of around 54%.
On average since the beginning of the year, this shows an average of 25.8764 against the greenback, flirting with the rate peaked after the 43% devaluation last year.
Since its inception, the currency has experienced a substantial depreciation of 48%.
Authorities are bracing for a continuation of this currency crisis throughout 2025, as indicated by the analysis presented in the 2025 budget by the Minister of Finance, Economic Development, and Investor Promotion.
In his budgetary framework, Minister Mthuli Ncube has projected a staggering 52% depreciation of the local currency for the fiscal year 2025.
This bleak outlook was reflected by the announcement of a fiscal budget totaling ZWG276.4 billion, which equated to approximately US$7.7 billion.
To derive this figure, the government employed an average exchange rate of 35.9, which signified an expected depreciation of the local currency to approximately ZWG36 per dollar in 2025.
This projection starkly contrasts with the then prevailing average rate of ZWG17.1 per dollar during 2024, indicating a foreseen depreciation of 52%.
Consequently, the exchange rate is anticipated to exceed 55 ZWG per USD in 2025, predicated on the expected average exchange rate of 36, which could culminate in a depreciation rate surpassing 60% by the end of 2025.
The current official exchange rate was established following a unilateral devaluation by the Reserve Bank of Zimbabwe (RBZ) from a pegged rate of approximately 1:13, which had been set when the currency was introduced in April of the previous year.
At that time, the government was under the impression that its gold reserves were sufficient to sustain the fixed exchange rate regime.
However, intense pressure from the parallel market, where rates occasionally diverged by as much as 100%, ultimately exposed the vulnerability of the official exchange rate.
In response, commercial entities became increasingly innovative, while authorities resorted to threats of enforcement against businesses accused of manipulating the exchange rate.
The underlying reality was that the RBZ was significantly increasing the money supply, a trend that is characteristic of its monetary policy.
Money supply at the M0 level surged by nearly 100% between June and August.
Projections for 2025 by the government suggest a persistent lack of stability in the currency market, compounded by an anticipated deterioration of economic conditions.
Suppliers who operated with exchange rates around 1:30 ZWG per USD will be compelled to adjust to an average rate exceeding 40 ZWG per USD this year.
This shift is likely to result in pricing challenges, heightened exchange rate volatility, and escalating inflation.
Such developments may signal a potential spiral in inflation rates, with analysts from Equity Axis projecting a conservative estimate of USD1: ZWG55 by the end of 2025.
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