• Annual inflation rate skyrocketed to 92.1%, driven by food and beverage prices
• US dollar (USD) saw a month-on-month decline of 0.3%
• The repeal of Statutory Instrument 81A allowed for market-driven pricing in ZiG
• Zimbabwe's inflation rates are significantly higher than its SADC peers

Harare- Zimbabwe's annual inflation rate in local currency (ZiG) skyrocketed to 92.1%, driven by food and beverage prices, while the US dollar (USD) saw a month-on-month decline of 0.3%.

The repeal of Statutory Instrument 81A allowed for market-driven pricing in ZiG, leading to a depreciation of the currency, whie the decrease in imports, especially maize saw a decrease in USD imported inflation. 

Zimbabwe's inflation rates are significantly higher than its SADC peers.

Zimbabwe’s inflation trends in May 2025 revealed a significant divergence between local currency, the ZiG, and the US dollar (USD), reflecting deep-seated monetary challenges.

The annual inflation rate in ZiG terms soared to 92.1%, driven primarily by rising food and non-alcoholic beverage prices, while the month-on-month rate increased to 0.9% from 0.6% in April.

Conversely, USD inflation exhibited a month-on-month decline of 0.3%, down from 0.2% in April, though its annual rate remained elevated at 13.9%.

This analysis explores the reasons behind the ZiG inflation increase and USD inflation decrease, links the latter to global USD trends, and compares Zimbabwe’s situation with five key Southern African Development Community (SADC) economies using the latest available data.

The escalation of ZiG inflation in May 2025 can be traced to a pivotal policy shift: the repeal of Statutory Instrument 81A of 2024, replaced by SI34 of 2025. Previously, SI81A penalised businesses for pricing above the Reserve Bank of Zimbabwe’s (RBZ) pegged exchange rate, enforcing an artificial ceiling of 27 ZiG per USD.

Its repeal allowed businesses to adjust prices to reflect market realities, shifting from the formal rate of approximately 27 to 32 ZiG per USD. Meanwhile, the parallel market rate surged to between 36 and 40 ZiG per USD.

This adjustment triggered a sharp depreciation of the ZiG, increasing demand for USD as a more stable store of value and reducing confidence in the local currency.

Consequently, ZiG-denominated prices rose, with the food and non-alcoholic beverages sector contributing 0.6% to the month-on-month CPI increase of 0.9%.

This sector’s dominance reflects the vulnerability of essential goods to currency fluctuations, amplifying the cost-of-living pressures evident in the Food Poverty Line (FPL) of ZWG 876.03 and Total Consumption Poverty Line (TCPL) of ZWG 1,279.69 per person in May 2025.

In contrast, the USD month-on-month inflation rate fell to -0.3%, indicating a slight deflation in USD-priced goods and services. This decline, shedding 0.5 percentage points from April’s 0.2%, reflect the USD’s relative stability as a globally accepted currency.

Despite this monthly drop, the annual USD inflation rate of 13.9% signals persistent inflationary pressures within Zimbabwe, far exceeding typical global USD inflation benchmarks.

Globally, USD inflation is primarily gauged by the US Consumer Price Index, where central banks like the Federal Reserve target rates around 2-3%.

Zimbabwe’s elevated USD inflation rate suggests that local factors such as reliance on imports , dominance of the informal market dominated by USD, supply chain inefficiencies, and high demand for USD-priced goods amplify price pressures beyond global norms.

Comparison with SADC Economies

Zimbabwe’s inflation rates, particularly in ZiG terms  contrast to its SADC counterparts.

In April 2025, South Africa’s annual inflation rate edged up to 2.8% from 2.7% in March, with a month-on-month increase of 0.3%. Key drivers included housing and utilities (4.4%) and food and non-alcoholic beverages (4%), tempered by a 3.9% decline in transport costs. South Africa’s stability stems from a robust currency, substantial foreign reserves, and predictable policies, starkly unlike Zimbabwe’s abrupt regulatory shifts.

Zambia’s annual inflation held steady at 16.5% in April 2025, with a month-on-month rise of 1%. Food inflation softened to 18.7% due to favourable rains, but non-food inflation rose to 13.4%, pressured by a weak kwacha. While high, Zambia’s rate is closer to Zimbabwe’s USD inflation (13.9%) yet dwarfed by the ZiG’s 92.1%.

Mozambique’s CPI decreased by 0.38% month-on-month in April 2025, suggesting deflationary pressures. This stability contrasts sharply with Zimbabwe’s ZiG inflation surge, highlighting differing economic trajectories within the region.

Botswana’s annual inflation eased to 2.3% in April 2025 from 2.8% in March, with a month-on-month rise of 0.8%. A decline in transport costs (-1.6%) drove this moderation, despite steady food inflation (5.9%). Botswana’s low rate reflects a controlled economic environment, far removed from Zimbabwe’s volatility.

Meanwhile, Tanzania’s CPI rose by 0.40% month-on-month in April 2025. This modest increase aligns with regional stability, contrasting with Zimbabwe’s dramatic ZiG inflation and even its higher USD rate.

Zimbabwe’s ZiG inflation of 92.1% annually and 0.9% month-on-month vastly exceeds these SADC peers, where rates range from 2.3% (Botswana) to 16.5% (Zambia). Even its USD inflation of 13.9% surpasses all but Zambia’s, reflecting pervasive economic instability.

The month-on-month ZiG rate of 0.9% outpaces South Africa (0.3%), Tanzania (0.40%), and Mozambique (-0.38%), aligning closer to Botswana (0.8%) and Zambia (1%), yet its annual figures reveal a uniquely severe crisis.

Therefore, Zimbabwe’s inflation dynamics expose profound economic vulnerabilities. The ZiG’s rapid rise, fueled by currency depreciation and policy inconsistency, erodes purchasing power and deepens poverty, as seen in the soaring FPL and TCPL.

The USD’s month-on-month decline offers little respite, given its high annual rate and Zimbabwe’s deviation from global USD stability.

In contrast, SADC neighbors like South Africa and Botswana benefit from stable currencies and predictable governance, fostering economic resilience.

Zimbabwe’s challenges like currency mistrust, “ambush policies,” and import reliance set it apart, necessitating urgent reforms to stabilise the ZiG, rebuild confidence, and align with regional economic norms for sustainable growth.

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