• Robust Reserve Growth: Foreign currency reserves surged over 150% from US$285 million in April 2024 to US$731 million by June 2025
• ZiG Adoption Surge: The ZiG’s share in electronic transactions rose from 26% to over 40% by June 2025, supported by increased cash availability
• Export-Led Recovery: Export earnings grew 25.7% to US$3.950 billion in H1 2025, with gold exports up 57.6% to US$1.385 billion

Harare- The Reserve Bank of Zimbabwe (RBZ) has released its 2025 Mid-Term Monetary Policy Statement, themed "Walking the Talk and Staying the Course to Durably Anchor and Consolidate Stability," highlighting significant progress in economic stabilisation. Foreign currency reserves soared over 150% by June 2025, fuelled by robust export growth and remittances, with total foreign currency receipts rising 23.1%. The policy emphasises increased ZiG adoption, with its share in electronic transactions climbing to over 40%, advancing de-dollarisation efforts. Despite these gains, challenges persist, including reliance on volatile commodity exports and a dominant foreign currency share in deposits, necessitating sustained efforts to diversify inflows and reinforce stability to achieve Zimbabwe’s 6% growth target.

Foreign Currency Reserves Growth

Policy Overview: Foreign currency reserves grew by over 150%, from US$285 million in April 2024 to over US$731 million in June 2025, supported by stronger foreign currency inflows and a deliberate accumulation strategy. Gold holdings increased from 2,626 kg (US$220 million) in December 2024 to 3,439 kg (US$362 million) in June 2025, with monetary gold dominating the reserves basket.

This substantial reserves buildup is the most newsworthy highlight, demonstrating Zimbabwe's progress toward the regional benchmark of 3-6 months of import cover and enhancing confidence in the ZiG currency. The growth, driven by export surges and remittances, provides a vital buffer against external shocks like commodity price volatility. However, achieving full benchmark coverage requires sustained inflows, and the reliance on gold exposes reserves to global market fluctuations.

ZiG Usage in the Economy

The proportion of ZiG in National Payment System electronic transactions rose from 26% in April 2024 to over 40% in June 2025, with increased local currency cash usage. The RBZ is ensuring ZiG cash availability (over ZiG200 million in bank vaults) and directing banks to distribute it via ATMs by end-September 2025, while modernising banknotes.

The rising ZiG adoption signals growing public trust and a key step in de-dollarisation, reducing USD dominance (which still accounts for 60% of RTGS transactions). This shift supports monetary sovereignty and economic stability, but persistent foreign currency preference (84.7% of deposits) highlights challenges. Continued stability and cash accessibility will be essential to accelerate usage and prevent reversion to dollarisation.

Foreign Currency Receipts

Total foreign currency receipts reached US$7.251 billion in the first half of 2025, a 23.1% increase from US$5.891 billion in 2024. Exports contributed US$3.950 billion (54.5%), remittances US$1.094 billion (15.1%), loan proceeds US$1.473 billion (20.3%), NGOs US$550 million (7.6%), income receipts US$65 million (0.9%), and foreign investments US$119 million (1.6%).

The robust 23.1% growth in receipts shows Zimbabwe's export-led recovery, particularly in mining, bolstering reserves and the balance of payments. However, the 55.7% drop in foreign investments signals waning investor confidence, potentially due to policy uncertainties. Diversifying sources beyond exports and remittances is crucial to mitigate risks from global economic slowdowns.

Export Earnings Contributions

Policy Overview: Export earnings totalled US$3.950 billion, up 25.7% from US$3.143 billion in 2024. Mining contributed US$2.807 billion (up 38.6%), with gold at US$1.385 billion (up 57.6% from US$879 million), platinum US$797 million (up 24.9% from US$639 million), lithium ore US$215 million (down 0.6% from US$216 million), chrome ore + ferrochrome US$150 million (down 0.4% from US$150 million), diamonds US$135 million (up 212.7% from US$43 million), and other minerals like coke US$89 million. Tobacco added US$784 million (up 5.6%), while manufacturing and agriculture declined.

Analysis: The mining sector's dominance, especially gold's surge, is a major economic driver, supporting the 6% growth target amid higher agricultural output. This commodity reliance boosts short-term inflows but exposes Zimbabwe to price volatility and environmental risks. Policies to enhance value addition in manufacturing (down 24.4%) could foster diversification and more sustainable export growth.

De-Dollarisation Roadmap

The roadmap will be finalised in the National Development Strategy II (NDS2), chaired by the RBZ's Thematic Working Group on Macroeconomic Stability and Financial Deepening. It emphasises maintaining stability, preserving foreign currency accounts, and honouring existing USD-denominated contracts beyond the 2030 multi-currency system.

This forward-looking roadmap addresses public fears of forced de-dollarisation, aiming for gradual ZiG dominance while protecting savings. Its success could entrench monetary independence, but rushed implementation risks economic disruption. Consultations must balance stability with growth to build stakeholder buy-in.

Inflation Outlook

Monthly inflation is expected to remain low and stable at 1-3%, supporting an end-of-year annual inflation below 30%. Despite base effects pushing June 2025 annual inflation to 92.5%, the outlook aligns with positive real interest rates.

The stable outlook is encouraging for investors and consumers, reflecting effective monetary tightening. Achieving sub-30% annual inflation would mark a significant win against hyperinflation history, but external factors like drought or global prices could derail it. The RBZ's Taylor Rule-based approach provides a structured framework for adjustments.

Bank Policy Rates

The policy rate remains at 35% (yielding a 5% real rate based on 30% projected inflation), with minimum/maximum corporate lending rates at 40.27%/46.51%. The overnight accommodation rate is 40%, with minimal use of the lender-of-last-resort facility.

Maintaining the 35% rate prioritises inflation control over growth stimulation, curbing speculative borrowing and sustaining downward trends. While effective in emerging markets, high rates may constrain credit access for businesses, potentially hindering the 6% growth target. Periodic MPC reviews will be key to balancing these trade-offs.

Targeted Finance Facility (TFF)

Disbursed ZiG420 million by June 2025, with an outstanding balance of ZiG350.4 million (reflecting repayments). Manufacturing (44.82%) and agriculture (34.73%) dominated, funded from statutory reserves and limited to productive sectors.

The TFF effectively channels funds to growth drivers like agriculture and manufacturing, supporting the 6% GDP target. Strong repayment rates indicate prudent use, but scaling disbursements and including more sectors could amplify impact without inflating liquidity risks.

Foreign Currency Payments

Payments totalled US$5.0 billion, up 17% from US$4.3 billion in 2024, with trade accounting for 82% (39% or US$1.941 billion for raw materials and capital goods).

The increase reflects rising import needs for industrialisation, aiding productivity. However, the trade-heavy outflow strains the current account, necessitating export growth to maintain surpluses. RBZ interventions help, but long-term import substitution strategies are needed.

Monetary Developments

Reserve money growth averaged 2.7% monthly in Q1 2025, peaked at 13.9% in April, then fell to -1.3% in June after NNCD tightening. Broad money reached ZiG97.34 billion (up 16.14%), driven by 18.85% growth in foreign currency deposits to ZiG70.47 billion (72.4% of total), with local currency at 14.45%.

Tightened controls have successfully moderated money supply, aiding price stability. Foreign currency dominance shows de-dollarisation hurdles, but the June decline signals effective liquidity management. Sustained measures could further align growth with inflation targets.

Refinement of Non-Negotiable Certificates of Deposit (NNCDs)

Recalibrated in May 2025 to non-redeemable (except for taxes/forex purchases), non-transferable, with a fixed 30-day zero-coupon tenor. Outstanding balance: ZiG1.536 billion as of June 2025.

This refinement enhances liquidity control and transitions to indirect tools, consolidating stability. It curbs excess money supply but may limit bank flexibility. Future remuneration could incentivise participation as markets mature.

Banking Sector Loans and Advances

Total loans reached ZiG67.5 billion (up from ZiG55.9 billion in December 2024), with foreign currency loans at 88.4%. Productive sectors secured 72%, including agriculture (16.8%), manufacturing (12.2%), and distribution (10.9%).

Growth in loans supports key sectors, aligning with economic targets. Foreign currency dominance reflects dollarization, but focus on productive lending improves asset quality. Monitoring is needed to prevent overexposure.

Credit to Private Sector

Monthly growth averaged 3.6%, annualizing to 52% nominal and 17% real (at 30% inflation), consistent with 6% GDP growth, underpinned by strong tobacco and gold output.

Balanced credit expansion fosters growth without fuelling inflation, leveraging agricultural and mining strengths. Real growth of 17% indicates sustainability, but equitable distribution across sectors will maximise benefits.

Balance of Payments Outlook

Current account surplus projected at US$622 million in 2025 (up from US$501 million in 2024), supported by exports and remittances.

The improved surplus strengthens external resilience, driven by inflows. Vulnerability to export declines persists, requiring diversification to ensure long-term viability.

Banking Sector Profitability

Profits fell to ZiG5.0 billion (US$184 million) from ZiG10.4 billion (US$760 million) in H1 2024. Fees/commission rose to 45.37% (from 17.74%), loan interest 31.91% (from 10.44%), with reduced reliance on forex gains (9.01% from 13.08%). ROA/ROE at 4.4%/12.8% (down from 13.4%/35.7%).

The decline reflects ZiG stability reducing revaluation gains, shifting to sustainable sources. This improves earnings quality, but lower returns challenge bank viability. Continued stability could enhance profitability.

Non-Performing Loans (NPLs)

NPL ratio stood at 3.34% in June 2025 (down from 3.37% in March 2025, benchmark <5%).

The satisfactory ratio indicates sound lending practices and sector health. Below international benchmarks, it supports credit expansion, but rising economic risks require ongoing vigilance.

Banking Sector Deposits and Liquidity

Deposits rose to ZiG112.8 billion (from ZiG89.1 billion), with foreign currency at 84.7%. Average liquidity ratio: 56.8%, with 18/19 banks compliant (>30% minimum).

Strong deposit growth and liquidity reflect resilience, but foreign currency dominance hampers de-dollarisation. High ratios provide shock absorption, aiding stability.

Foreign Exchange Market Interventions

RBZ intervened with US$449 million in H1 2025 (up from US$407 million), via the Willing-Buyer-Willing-Seller market to meet demand. Buffers planned for H2 seasonal increases.

Interventions stabilize forex, covering gaps, but rising demand (e.g., festive/agricultural seasons) strains reserves. Enhancing interbank efficiency could reduce reliance.

Sustainable Banking Practices

15/19 banks, plus other institutions, adopting Sustainability Standards & Certification Initiative (SSCI). All complied with nominating board sustainability champions by March 2025. Survey on ISSB disclosures for climate risks ongoing.

Momentum in sustainability aligns with global ESG trends, enhancing competitiveness. Early adoption positions Zimbabwe favourably, but full implementation needs capacity building for measurable impacts.

Non-Compliance Penalties

Revised to 1% of transaction amount or US$100,000 (ZiG equivalent), whichever greater, or license suspension/revocation for forex violations.

Stricter penalties promote compliance and market integrity, deterring abuses. While effective, high thresholds may burden small entities, requiring proportional enforcement.

This analysis highlights the RBZ's focus on stability and growth, with notable successes in reserves and ZiG adoption, but ongoing challenges in de-dollarisation and diversification persist.

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