• The ZiG  appreciated by 0.04% against the USD in the formal market, supported by gold reserves and global gold prices surpassing $4,200 per ounce
• The IMF projects a 6% GDP growth for Zimbabwe in 2025, driven by agricultural recovery, record gold prices, and monetary tightening measures
• Seasonal forex shortages, driven by farming and festive demands, pose risks to ZiG stability, requiring proactive RBZ interventions

Harare- The Zimbabwe Gold (ZiG) currency is exhibiting a modest resilience this week in the formal market, appreciating by 0.04% against the US dollar last week. This slight gain aligns with broader stabilisation trends observed since mid-2025, where the official willing-buyer-willing-seller (WBWS) rate has hovered between ZiG25 and ZiG27 per USD.

In contrast, the parallel market rate remains stable, fluctuating narrowly within ZiG32–ZiG34 per USD, reflecting a persistent but narrowed premium of around 27% over the formal rate.

This equilibrium in the parallel segment reflects reduced volatility compared to earlier quarters, though the ZiG's overall adoption remains constrained by high dollarisation which accounts for 90% of the economic activities.

The ZiG's backing by gold reserves, with over 35 tonnes of gold deliveries year-to-date, has provided a stabilising anchor amid these dynamics. Global gold prices reached historic peaks this month, surpassing $4,000 per ounce on October 8 and trading near $4,208 by October 21, up over 25% since early 2025. This surge has not only bolstered the ZiG's intrinsic value but also incentivised formalisation efforts of the informal miners, with now over 80% of gold deliveries coming from small scale miners.

The International Monetary Fund (IMF) has injected a dose of cautious optimism into Zimbabwe's economic narrative, projecting a robust 6% GDP growth for 2025, outpacing the Sub-Saharan Africa average of 4% and positioning the country as Southern Africa's top performer. This rebound from the 1.7% growth in drought-hit 2024 is attributed to favourable agricultural recovery, record gold prices, and steady remittance inflows, which have strengthened the current account surplus.

The IMF highlights monetary tightening measures, including the Reserve Bank of Zimbabwe's (RBZ) policy rate at 35% and slowed monetary base growth to 30% year-on-year, as key to curbing inflation to a monthly average of 0.3%. These policies have fostered macroeconomic stability, with the IMF commending efforts to halt quasi-fiscal operations and enhance ZiG demand through Treasury operations in local currency.

Complementing this, the ZiG's gold linkage has spurred formalisation from the informal sector, which dominates 76–80% of economic activity. Elevated gold prices have encouraged small scale miners, responsible for 80% of output, to channel deliveries through official channels like Fidelity Gold Refinery, boosting year-to-date volumes to record highs despite a slight May dip.

Government incentives, such as tax breaks for formal transactions and integration strategies akin to South Korea's digital payment promotions, are gradually drawing informal traders into the fold, reducing illicit flows and enhancing RBZ reserves (now approaching US$1 billion). This shift not only supports ZiG credibility but also aligns with broader goals to limit dollarisation by 2030.

Despite these tailwinds, forex liquidity remains a perennial vulnerability, particularly in the fourth quarter. Zimbabwe's economy typically faces acute shortages during this period due to heightened import demands for farming season preparations such as seeds, fertilizers, and equipment as households gear up for the October–November planting cycle.

Compounding this is the lean food period post-harvest, where domestic supplies dwindle, exacerbating import reliance. Additionally, the festive season's spending surge, driven by holiday imports and remittances, intensifies USD demand, often widening parallel market premiums and straining RBZ interventions.

In 2025, these seasonal factors are amplified by lingering fiscal pressures, including public wage hikes and debt servicing, which have led to domestic arrears buildup. Banking sector liquidity constraints persist, with tight local currency measures curbing interbank flows and foreign investor participation on the Zimbabwe Stock Exchange (ZSE).

While the RBZ has expanded auction allotments and plans to lift weekly transaction limits, delays and disparities could trigger price spikes, as seen in past Decembers when parallel rates jumped 15% amid festive inflows. Addressing this requires proactive measures like reserve accumulation and redirecting export surrenders to boost market depth.

Market participants are eyeing Finance Minister Professor Mthuli Ncube's upcoming November 2025 budget presentation with anticipation, as it will serve as the inaugural fiscal blueprint for the National Development Strategy 2 (NDS2) under the theme "Enhancing Drivers of Economic Growth and Transformation Towards Vision 2030." Expectations centre on fiscal discipline to sustain 5% medium-term GDP growth (2026–2029), including revenue mobilization via a reviewed personal income tax-free threshold and targeted incentives for formalisation.

Key priorities likely include bolstering social spending on health and education amid public calls to mitigate living costs and climate-proofing agriculture to counter Q4 risks. The budget may also outline bridge financing of $2.6 billion by Q1 2026 to clear external arrears and unlock concessional funding, alongside structural reforms like transparent FX pricing and Mutapa Investment Fund asset management.

Downside risks, such as adverse weather or mineral price dips, could temper optimism, but alignment with IMF recommendations such as market-based instruments and ZiG promotion, offers a pathway to resilience.

This week's ZiG appreciation signals incremental progress in a stabilizing environment buoyed by IMF-backed growth prospects and gold's stellar run. However, Q4 liquidity strains pose immediate tests, underscoring the need for vigilant policy navigation. The 2026 budget represents a key "golden opportunity" to harness formalization gains and fortify the ZiG against seasonal headwinds, potentially paving the way for inclusive recovery.

Stakeholders should monitor RBZ interventions closely, as any slippage could reignite parallel market volatility. Overall, the outlook remains cautiously positive, contingent on sustained reforms.

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