• ZiG trades steadily around 25.57, supported by gold and foreign currency reserves growth, delivering single-digit inflation and outperforming several regional peers in volatility control
• Official rate remains overvalued by 20–29% compared to PMR, creating value leakage for exporters under the 30% surrender rule, though robust export inflows have partially offset distortion
• High interest rates, tight liquidity management, and elevated reserve requirements have curbed credit expansion and anchored macroeconomic stability

Harare- The Zimbabwe Gold (ZiG), the local currency unit, traded at approximately 25.57 against the US dollar on February 20, 2026, reflecting a marginal depreciation from 25.56 the previous week but maintaining overall stability amid subdued volatility in the foreign exchange market.

This modest softening, amounting to a 0.11% daily decline based on recent sessions, shows the ZiG's resilience in the face of external pressures, supported by bolstered foreign exchange reserves and prudent monetary management.

The currency's performance contrasts with broader regional trends in the Southern African Development Community (SADC), where the South African Rand (ZAR) hovered around 16.00 per USD, exhibiting greater volatility with intraday spreads influenced by commodity price fluctuations and global risk sentiment, while the Zambian Kwacha (ZMW) traded near 18.40 per USD, continuing its multi-year depreciation trajectory amid fiscal imbalances and copper export dependencies.

Anchoring this stability is a significant accumulation in Zimbabwe's foreign currency reserves, which climbed to around US$1.2 billion by the end of 2025, equivalent to about 1.2 months of import cover, with projections for further buildup in 2026 through strategic mineral acquisitions.

Gold holdings within these reserves stood at 2.7 tonnes, valued conservatively at current market prices, contributing substantially to the ZiG's asset-backed framework alongside other precious minerals and cash deposits.

This reserve enhancement, driven by record gold production of 46.7 tonnes in 2025 yielding export earnings of US$4.6 billion has provided critical liquidity to defend the currency against speculative attacks and facilitate interventions in the interbank market.

The ZiG's backing by a diversified basket of US dollars and precious metals, particularly gold, has mitigated depreciation risks, enabling it to outperform more volatile peers like the ZMW, which has shed over 20% against the USD in the past year due to external debt vulnerabilities.

The influx of foreign currency through robust exports, remittances, and diaspora inflows has partially counterbalanced the Reserve Bank of Zimbabwe's (RBZ) 30% export surrender requirement, which mandates exporters to relinquish a portion of hard currency earnings to the central bank at the official rate. This policy, while ensuring reserve accretion, has contributed to a perception of overvaluation in the formal market relative to the parallel rate, resulting in a premium of approximately 29%, a narrowing from prior peaks but still indicative of arbitrage opportunities.

Exporters face a notional 29% erosion in value when accessing parallel markets for inputs or raw materials, as suppliers often quote in alignment with informal rates, however, surging export receipts from gold and tobacco have injected sufficient USD liquidity to alleviate some of these distortions.

In comparison, Botswana's Pula (BWP), trading at around 12.85 per USD, benefits from similar diamond-backed stability but with lower premiums due to more integrated fiscal-monetary frameworks, highlighting Zimbabwe's ongoing challenges in fully converging official and parallel channels.

To maintain liquidity discipline and curb inflationary impulses, the Zimbabwean government has deployed a contractionary monetary policy arsenal, including a sustained policy rate of 35% to elevate borrowing costs and suppress credit expansion.

Key strategies encompass stringent reserve money targeting, with growth capped at ZiG 5.3 billion as of end-2025, alongside the cessation of quasi-fiscal operations by the RBZ to prevent monetary financing of deficits.

Enhanced liquidity forecasting through government collaboration, phased transitions to market-based instruments like open market operations, and elevated reserve requirements have further constricted broad money supply, fostering a disinflationary environment that saw annual inflation plummet to 4.1% in January 2026, the first single-digit reading in over two decades.

These measures, while denting short-term borrowing and investment, have fortified macroeconomic stability, drawing parallels to Zambia's recent IMF-backed tightening but with Zimbabwe achieving swifter inflation convergence amid its gold reserve leverage.

Corporate earnings resilience has further underpinned economic stability, with over 80% of revenues reported in USD across key sectors, insulating balance sheets from local currency fluctuations and sustaining dollarization as a de facto hedge.

This dual-currency dynamic, where USD accounts for roughly 80% of transactions, supports inclusive growth projections of 5% for 2026, driven by agriculture, mining, and manufacturing.

Nonetheless, the RBZ's five-year strategic plan (2026–2030) emphasizes gradual de-dollarization toward a mono-currency regime by 2030, contingent on sustained reserve buildup to three-to-six months of import cover and deepened market confidence.

Regionally, this ambition aligns with SADC peers like South Africa, where the ZAR's managed float has enabled policy flexibility, but Zimbabwe's path requires vigilant governance reforms to mitigate risks of reversion to hyperinflationary cycles.

Equity Axis News