• ZiG has shown notable stability since the start of 2025, supported by a robust policy framework
• Delays in payments to key suppliers, including platinum exporters have created domestic arrears, risking increased liquidity
• Persistent underutilisation of the budget could compel the RBZ to resort to money creation to meet fiscal obligations

Harare- The Zimbabwe Gold (ZiG) closed the week ended 8 August 2025 at an exchange rate of 26.7605 against the USD, reflecting a marginal appreciation from 26.7369 the previous day and aligning with the rate recorded on August 1.

The currency market in Zimbabwe has exhibited notable stability since the start of 2025, underpinned by a robust policy framework characterised by stringent monetary and fiscal discipline, a sustained positive current account balance, delayed payments for suppliers and exporters creating an artificial shortage and prudent management of money supply.

The Reserve Bank of Zimbabwe (RBZ) has played a pivotal role in maintaining this stability through strategic interventions in the Willing-Buyer Willing-Seller (WBWS) foreign exchange market, ensuring market clearing and fostering exchange rate equilibrium.

Bolstering this stability, foreign currency receipts surged by 23.1% in the first half of 2025, reaching US$7.2 billion compared to US$5.9 billion in the same period of 2024, driven primarily by export earnings and international remittances.

This influx has significantly strengthened Zimbabwe’s foreign currency reserves, which soared by over 150% from US$285 million in April 2024 to over US$730 million by June 2025, as reported in the Mid-Term Budget Review and Mid-Term Monetary Policy Statement.

Inflation dynamics further reflect the effectiveness of these policies. Monthly ZiG inflation has remained low and stable, averaging 0.64% from February to July 2025, while annual ZiG inflation, which stood at 95.8% in July, is projected to moderate significantly to approximately 30% by year-end, according to the aforementioned policy documents.

To consolidate price and exchange rate stability, the RBZ refined its open market operations in May 2025 by recalibrating Non-Negotiable Certificates of Deposit (NNCDs) to a fixed 30-day term and eliminating early redemptions.

Additionally, the absence of central bank financing for the Treasury has curtailed monetary expansion, further anchoring inflation expectations.

A key policy measure, the mandatory 50:50 ZiG-USD split for Quarterly Payment Dates (QPDs), has been implemented to boost demand for the local currency, compelling economic agents to increase ZiG transactions to meet tax obligations.

The RBZ has also maintained the Bank Policy Rate at 35%, alongside statutory reserve requirements of 15% for savings and time deposits and 30% for demand and call deposits in both local and foreign currencies.

The foreign currency retention threshold for exporters remains at 70%, with a 30% surrender requirement, further supporting liquidity management in the foreign exchange market.

These policies, combined with a positive current account balance and growing foreign reserves, provide a solid foundation for near-term ZiG/USD exchange rate stability.

The government’s commitment to “durably anchor and consolidate stability,” as articulated in its policy statements, is a critical driver of this outlook.

The 50:50 QPD policy is particularly significant, as it incentivises greater use of ZiG, potentially reducing reliance on the parallel market and strengthening the currency’s position in the formal economy.

The sustained low monthly inflation rate signals that prudent money supply management is yielding results, with the government anticipating a sharp decline in annual inflation by the end of 2025.

However, despite these positive indicators, significant risks threaten the ZiG’s stability and could precipitate a sharp depreciation.

A critical concern is the government’s failure to pay key suppliers, including platinum group metals (PGM) firms, for their 30% export proceeds in ZiG since January 2025.

This delay has led to a buildup of domestic arrears, which, when settled, could inject a large volume of ZiG into the market, significantly increasing money supply.

Such a rapid liquidity surge risks triggering inflationary pressures, eroding confidence in the ZiG, and driving a sharp depreciation against the USD.

Moreover, suppliers facing payment delays may increasingly opt for USD transactions to mitigate risk, further marginalizing the ZiG and weakening its demand.

Compounding these risks is the underutilisation of the budget by government ministries, which signals either liquidity constraints or inefficiencies in fiscal management.

This under-execution hampers planned economic stimulus and capital projects, potentially stifling economic activity and undermining investor confidence.

In a worst-case scenario, persistent budget underutilisation could force the RBZ to resort to money creation to meet fiscal obligations, a highly inflationary move that would further destabilise the ZiG.

While the government’s policy framework, as outlined in the Mid-Term Budget and Monetary Policy Statement, projects a stable and strengthening ZiG, these operational challenges reveal a more precarious reality.

The success of these policies hinges on the government’s ability to align its fiscal management with its stated objectives. Failure to address the timely payment of suppliers and ensure efficient budget execution could lead to a sudden liquidity shock, dampened economic growth, and diminished confidence in the ZiG.

Thus, the trajectory of the ZiG/USD exchange rate remains delicately balanced between the government’s policy aspirations and the practical realities of its fiscal and monetary discipline.

For the ZiG to maintain its stability, the government must not only articulate a robust policy vision but also demonstrate operational competence in its implementation.

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