- ZiG Plummets 49% Since Launch: From 26.78 on April 4 to 26.81 by April 11, extending its record-breaking gradual slide
- RBZ’s tight monetary policy, including a 35% benchmark interest rate and steep reserve ratios, aims to cap liquidity but chokes lending, pushing borrowing costs above 35%
- Monthly ZiG inflation dropped from 10.5% in January to -0.1% in March, but April's debut ZimStat data may show a "high" annual figure tied to last year's devaluation
Harare- Zimbabwe’s Gold-backed currency (ZiG) hit fresh week-on-week lows in April 2025, dropping from 26.78 on April 4 to 26.81 by April 11, extending its record-breaking gradual slide.
Since its debut on April 5, 2024, at 13.56, the ZiG has shed 49.4% against the US dollar.
March saw a 0.8% decline on the formal market, up from February’s 0.7% but milder than January’s 2.2%, signalling a persistent but controlled erosion.
The parallel market offers slight relief, with the premium easing from 34% in February narrowing the gap to 26.9%.
This stems partly from the government’s tactic of delaying supplier payments since December 2024, with only partial settlements trickling in from January. The Reserve Bank of Zimbabwe (RBZ) doubles down on this restraint, maintaining a 35% benchmark interest rate and steep reserve ratios (30% for demand deposits, 15% for savings in ZiG and USD).
These measures aim to cap liquidity and prevent a free-fall reminiscent of Zimbabwe’s hyperinflation days.
Yet, this tight grip comes at a steep price. High rates and reserve requirements choke lending, pushing borrowing costs well above 35% with commercial add-ons. Key sectors like agriculture, manufacturing, and retail vital for jobs and GDP face a credit drought, worsened by power outages, forex scarcity, and market swings.
The RBZ’s focus on managing the ZiG’s slow bleed sacrifices growth, deepening the “low aggregate demand” it notes but sidesteps.
The ZiG’s demand crisis is glaring. Rentals, fuel, medical services, and capital goods lean heavily on USD, reflecting scant faith in the local currency. The RBZ’s abrupt 43% devaluation in September 2024 (from 13.9 to 24.39 per USD, now 26.8 by April 2025) further eroded trust.
To reverse this, mandating ZiG payments for essentials like passports, fuel, and government services could spark real demand, anchoring its value. Without this, tight supply-side policies, and high rates and reserves fall short of fostering lasting stability.
Inflation trends shows the urgency. Monthly ZiG inflation dropped from 10.5% in January to -0.1% in March, but April’s debut ZimStat data looms with a “high” annual figure tied to last year’s devaluation.
The RBZ eyes annual inflation below 30% by year-end, banking on its restrictive stance. Yet, with parallel rates outpacing the official peg, this optimism feels shaky.
Historically, Zimbabwe’s aggressive rates like 200% in 2022 curbed inflation but bred stagnation. Today’s 35% mirrors that trade-off, prioritising price control over recovery.
The ZiG’s managed decline avoids outright collapse, but without bold demand-side moves, Zimbabwe’s economy risks suffocating stabilised, yet stuck.
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