- ZiG has reached a 48-day low, trading at 26.6486 against the USD, highlighting underlying structural issues in monetary policy
- The Ministry of Finance faces the challenge of stabilising the currency while increasing public sector capital expenditure without inflating the money supply
- Proposed measures include tax rationalization for the mining sector, and prioritising infrastructure investments to enhance productivity and reduce dependency on imports
Harare- The Zimbabwe Gold (ZiG) registered a 48-day low on March 10, 2025, trading at 26.6486 against the USD, marginally above its January 22 nadir of 26.7116.
While the 0.2% week-on-week depreciation appears negligible, it reflects latent structural vulnerabilities in monetary policy frameworks, juxtaposed against regional peers such as the South African Rand (ZAR) and Botswana Pula (BWP), which have stabilized within 2% YTD volatility bands.
Historically, the ZiG’s 43% overnight devaluation in Q4 2024 eroded corporate balance sheets, necessitating aggressive recalibration by the Ministry of Finance, Economic Development, and Investment Promotion (MoFED&IP).
The MoFED&IP’s FY2025 baseline projection of a 52% annual depreciation (targeting an average ZiG 36/USD) with YTD resilience as the currency has declined fractionally (<1%) a feat attributed to tightened liquidity management after the 2024 SADC Summit reflects another possible devaluation of the currency in the long-run.
Post-summit, the government’s abrupt contraction of contractor payments shifting to phased disbursements curtailed local currency supply, narrowing the parallel market premium from 80% (September 2024) to 33% by March 2025.
This recalibration reduced the informal exchange rate from ZiG 50/USD to ZiG 35/USD, aligning partially with formal benchmarks.
The MoFED&IP now faces a dual mandate: sustaining currency stability while reactivating public sector capital expenditure without reigniting money supply growth.
Current policy frameworks risk undermining export competitiveness, particularly for forex-generating sectors like mining.
Exporters face punitive surrender requirements (30% of earnings converted at suboptimal rates), disincentivising external sales.
Despite buoyant good prices, margin compression from surrender levies has prompted exporters to prioritise domestic sales, reducing forex liquidity buffers.
Tax policy adjustments including value-chain incentives and reduced surrender ratios are critical to aligning Zimbabwe’s regime with regional peers like Zambia and South Africa.
Surrender obligations and infrastructural bottlenecks (erratic power supply) threaten operational EBITDA margins for companies.
Structural gaps in Zimbabwe’s productivity import dependency at 70% of GDP versus Botswana’s 35% limit organic forex generation, perpetuating reliance on mineral exports.
Zimbabwe needs to develop a creation economy that prioritizes local production and value-added industrialization, rather than remaining dependent on imports. This shift is essential for fostering sustainable economic growth and increasing manufacturing's contribution to GDP.
Pathway to Stability: Policy Recommendations
Monetary Anchoring: Transitioning from ad hoc liquidity contractions to a structured multi-tier foreign exchange (forex) retention framework would enhance monetary credibility. Coupled with transparent forex auction mechanisms, such a regime would bolster investor confidence while preserving liquidity for critical imports, such as energy and machinery.
Tax Rationalisation: Implementing sliding-scale royalty structures for mining sectors, indexed to production volumes, would harmonise fiscal incentives with output growth. For example, gold miners like Padenga Holdings could face reduced royalty rates (e.g., 3% vs. the current 5%) upon exceeding a certain annual threshold, incentivising scale while maintaining revenue neutrality for the state.
This approach mirrors Zambia’s variable mineral royalty framework, which adjusts rates based on global commodity prices.
Simultaneously, revising export surrender requirements, reducing mandatory conversions from 30% to 10% for high-volume exporters would mitigate margin erosion, aligning Zimbabwe’s regime with regional peers.
Infrastructure-Linked Expenditure: Prioritising solar energy investments through public-private partnerships (PPPs) would address chronic power deficits that hinder mining productivity. Allocating a portion of forex reserves to fund 500MW of solar capacity by 2026, paired with tax rebates for industrial adopters, could reduce grid dependency and operational downtime.
For context, Zimbabwe’s mining sector loses ~$200 million annually to power outages, per Chamber of Mines data. Concurrently, rehabilitating transport corridors via infrastructure bonds denominated in ZiG would stimulate local currency demand while easing logistics bottlenecks that inflate export costs by 15–20%.
These measures, executed cohesively, would anchor the ZiG’s stability, align fiscal and monetary policies with productivity growth, and position Zimbabwe to capitalize on its mineral wealth while diversifying its economic base.
Therefore, Zimbabwe’s currency conundrum hinges on balancing fiscal discipline with growth catalysis. While the ZiG’s narrowed premium signals short-term stabilisation, there is still a long-road to go.
For Harare, replicating Botswana’s actual diamond-backed Pula model, linking currency credibility to actual mineral reserves could offer a blueprint. However, without systemic tax and liquidity reforms, Zimbabwe risks perpetuating a cycle of volatility, constraining its $12 billion mining ambition.
The ZiG’s trajectory now rests on policymakers’ ability to harmonise monetary rigor with industrial pragmatism.
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