• The RBZ has abandoned its fixed 2030 de-dollarisation target, adopting a conditions-based framework under its 2026–2030 Strategic Plan
• Transition to a mono-currency will depend on sustained low inflation, improved foreign reserve cover (3–6 months of imports), exchange rate stability, and fiscal-monetary policy alignment
• Despite falling ZiG inflation, over 80% of transactions remain in US dollars

Harare - The Reserve Bank of Zimbabwe (RBZ) has shifted its long-term monetary reform strategy from a fixed 2030 mono-currency target to a conditions-based framework, signalling that the transition to a single domestic currency will only occur once strict economic benchmarks are sustainably met under its 2026–2030 Five-Year Strategic Plan.

The recalibration, unveiled on 8 January 2026 and reinforced during discussions with Treasury and International Monetary Fund (IMF) officials under the ongoing Staff-Monitored Programme (SMP), represents a deliberate attempt to anchor currency reform in measurable macroeconomic fundamentals rather than political timelines.

It is also an implicit acknowledgement of Zimbabwe’s difficult monetary history  one that continues to shape market psychology.

For nearly two decades, Zimbabwe has operated within a de facto dollarized system following the hyperinflationary collapse of 2007–2008, when the Zimbabwe dollar lost virtually all value and wiped out savings across households and corporates.

The adoption of a multi-currency regime in 2009, dominated by the US dollar but incorporating regional currencies such as the rand and pula, restored price stability almost immediately. However, that stability came at the cost of monetary policy autonomy.

Subsequent attempts to regain that autonomy proved turbulent. Bond coins introduced in 2014 and bond notes in 2016 were initially positioned as liquidity management tools but gradually assumed broader monetary functions.

In 2019, authorities formally ended the multi-currency regime and introduced the RTGS dollar as sole legal tender. Within a year, inflation accelerated sharply and confidence evaporated, forcing a reversal in 2020 and the re-legalisation of the US dollar. Four failed currency iterations in less than two decades entrenched a behavioural shift: the US dollar became not merely a transactional currency, but a psychological hedge against policy volatility.

It is against this backdrop that the Reserve Bank’s mono-currency ambition must be assessed.

Governor John Mushayavanhu has made clear that dollarisation will only be unwound once specific “conditions precedent” are achieved. These include sustained low inflation, adequate foreign exchange reserves equivalent to between three and six months of import cover, a sound financial and payments system, an efficient and transparent exchange-rate mechanism, and strong coordination between fiscal and monetary authorities.

At present, Zimbabwe holds approximately 1.5 months (one and half ) of import cover, well below the upper six-month benchmark, which would require an estimated US$4.7 billion based on recent trade data.

In an economy heavily reliant on imports for fuel, electricity inputs, industrial raw materials and essential goods, reserve adequacy is more than a technical indicator  it is a macroeconomic safeguard against external shocks.

The most visible progress has been recorded on inflation. Following the introduction of the Zimbabwe Gold (ZiG) currency in April 2024, headline ZiG inflation declined sharply from 85.7% in April 2025 to around 15.5% by year-end, and in January 2026 it recorded a 4.1% record single digit .

Tight monetary conditions, exchange-rate management and partial gold backing have contributed to moderating volatility and anchoring expectations.

The structural reality tempers that progress, Zimbabwe remains deeply dollarized, with more than 80% of deposits and transactions conducted in US dollars.

As a result, ZiG inflation statistics reflect only a minority portion of overall economic activity. Domestic US dollar inflation is estimated at roughly 12.3%, significantly higher than inflation in the United States itself, which averaged around 2.7% in 2025. This divergence reflects structural supply constraints, high operating costs, tax burdens, import dependence and embedded risk premiums in local pricing.

In practical terms, monetary tightening in ZiG suppresses local liquidity without fundamentally altering pricing behaviour in the predominantly US dollar segment of the economy. Stability has been achieved, but its depth remains limited.

The Reserve Bank has maintained a policy rate of 35% to anchor inflation expectations and discourage speculative borrowing. While this has helped stabilise the exchange rate, it has also imposed acute liquidity pressures.

Corporates across manufacturing, agriculture and retail  including large established firms such as OK Zimbabwe and Khaya Cement  face constrained access to affordable credit and widening working capital gaps. Investment decisions have slowed as borrowing costs remain elevated in an already capital-scarce environment.

In an economy where only about one-fifth of transactions occur in local currency, aggressive tightening risks becoming a blunt instrument. It controls ZiG supply but cannot directly discipline US dollar-based pricing. The outcome is macroeconomic restraint without comprehensive behavioural change control without fully restored confidence.

Fiscal dynamics add another layer of complexity. Although the RBZ has transferred quasi-fiscal activities to Treasury, persistent delays in government payments to contractors and suppliers indicate that liquidity constraints have not disappeared but shifted.

Arrears accumulation functions as an implicit fiscal adjustment mechanism, improving headline budget discipline while transferring financial strain to the private sector. Contractors awaiting settlement have limited incentive to transact in ZiG, reinforcing dollar preference and weakening organic demand for the local unit.

The premium between official and parallel exchange rates, while narrower than in previous crisis episodes, reflects tight liquidity conditions rather than broad-based trust. Stability achieved through constrained money supply and delayed fiscal settlements can reduce volatility, but it also builds underlying pressure if not supported by stronger structural fundamentals.

Trust remains the most binding constraint in Zimbabwe’s monetary reform process. Households and businesses have lived through abrupt devaluations, forced currency conversions and significant wealth erosion. The 43% devaluation of the ZiG in September 2024 remains fresh in market memory. Rebuilding credibility in the domestic currency requires prolonged policy consistency, transparent reserve management and demonstrable fiscal discipline over several years, not months.

External vulnerabilities further complicate the outlook. Zimbabwe’s foreign exchange inflows are heavily dependent on gold exports. A downturn in global commodity prices  potentially triggered by easing geopolitical tensions or slowing global growth  would weaken reserve accumulation and strain the very benchmarks underpinning the mono-currency strategy. Without broader export diversification and productivity gains, reserve buffers remain exposed to global commodity cycles.

The Reserve Bank’s Five-Year Strategic Plan reflects a more structured and disciplined approach than previous reform attempts. By abandoning rigid timelines and tying the mono-currency transition to measurable economic conditions, authorities appear determined to avoid premature policy moves. However, technical benchmarks alone will not determine success.

The sustainability of a mono-currency system will depend on whether macroeconomic stability can evolve into durable confidence. Until households are willing to save in ZiG without hedging into US dollars, and businesses are comfortable pricing long-term contracts in the local unit, dollarisation will remain deeply embedded.

Equity Axis News