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Harare- In a grim revelation, Zimbabwe’s economy faces a turbulent 2025, as government anticipates a precipitated devaluation of the national currency the Zimbabwe Gold (ZWG), which it says is backed by the burgeoning gold commodity.
This grim forecast follows Finance and Economic Development Minister Professor Mthuli Ncube's announcement of a fiscal budget totalling ZWG276.4 billion, equivalent to US$7.7 billion, last week in Mt Hampden, at the new Parliament.
To arrive at this figure, the government applied an average exchange rate of 35.9, suggesting an anticipated depreciation of the ZiG to average to about ZWG36 per dollar in 2025.
This contrasts sharply with the current average rate of 17.1 (2024) ZWG per dollar, indicating a deep anticipated depreciation of 52%.
Equity Axis analysts in their analysis of the budget predict that the exchange rate will exceed 55 ZWG per USD in 2025, based on the expected 2025 average exchange rate of 36 which would result in the depreciation rate of over 60% by 2025-year end.
Economists view average exchange rates as indicative of inflation, this implies that inflation will soar to annual average of beyond 50% in 2025, reflecting a corresponding rise in prices.
This situation signals a troubling outlook for the local currency's performance in 2025 despite the framework crafted based on resilience and sustaining stability.
It shows the rate will depreciate above 36 against the current 25.5.
To arrive at the current official exchange rate, the RBZ unilaterally devalued the currency from a pegged rate of about 1:13, which it was set at which currency was introduced earlier in April of this year.
The government believed then that the gold at its disposal saved as reserves was enough to maintain the fixed exchange rate.
However, the parallel market pressure, which at one time saw the rates diverge by a factor of 100%, exposed the official exchange rate.
Commerce became crafty and authorities as would be typical threatened to take action on errand business which it claimed was fixing the exchange rate.
The reality of the day was that RBZ was busy raving up money supply as it is typically known for. Money supply grew by nearly 100% at M0 level between June and August.
The 2025 projections by government suggest a lack of stability in the currency market and an anticipated worsening of economic conditions.
Suppliers currently relying on exchange rates quoting 1:30 ZWG per USD will need to adapt to an average of over 45 ZWG per USD in 2025, leading to pricing challenges, exchange rate volatility, and increased inflation.
Such developments may point to spiralling of inflation with Equity Axis analysts’ projections of rate being just above USD1: ZiG 55 by year end 2025 at the most conservative.
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