• ZiG has maintained stability for nearly a year, appreciating 0.04% in September 2025 and narrowing the premium to 23%
• The interbank market has improved, with the RBZ clearing trades efficiently and minimal direct intervention, yet the issuance of Treasury Bills and delayed export surrender payments threaten long-term currency stability
• Strong export performance and increasing informalisation present opportunities for businesses, but the government’s 2030 ZiG roadmap and accumulating fiscal pressures could amplify the impact of a currency crisis

Harare- The local currency, the ZiG, has maintained a stable performance for nearly a year, marking a significant milestone in the country’s economic landscape.

On September 16, 2025, the ZiG opened the week firm at 26.7325, slightly down from 26.7290 the previous week, and narrowing the premium between the formal and parallel markets to below 30%, the lowest to date at 23%.

This stability has positioned the ZiG as the best-performing local currency introduced in Zimbabwe, preserving value and boosting overall economic demand despite the dominance of foreign currency (forex) in transactions.

Companies reporting earnings for the half-year to June 2025 have noted improving demand and real earnings growth, adjusted for fair value gains, largely attributed to the stable currency regime.

In September alone, the ZiG appreciated by 0.04% against the US dollar on the formal market, further solidifying its role in fostering economic stability.

Despite this positive performance, concerns linger about the sustainability of the ZiG’s stability.

Initially, the currency was not freely floating, as its value was pegged to the price of gold, bypassing market forces that typically determine equilibrium exchange rates.

Over its one-year lifespan, authorities adjusted the market mechanism, moving away from the gold peg to allow a degree of flotation, enabling the ZiG to achieve stability against the USD.

This shift has been credited for supporting improved business performance across various sectors, as reflected in corporate earnings.

However, questions remain about whether this stability is fundamentally driven or merely cosmetic, potentially risking a near-term currency implosion.

The interbank market has shown improvement, with the Reserve Bank of Zimbabwe (RBZ) clearing trades within reasonable timeframes, unlike in the past, and there is limited direct intervention to manipulate the exchange rate, allowing market forces to play a more significant role.

Nevertheless, the apparent stability of the ZiG may not fully reflect underlying economic fundamentals. Authorities have shifted from direct control through pegging and market manipulation to indirectly influencing fundamentals, primarily through accruing unpaid expenditures.

Outstanding payments to contractors and service providers have risen to approximately US$1.5 billion, up from $1.2 billion in the first half of 2025. Exporters subject to export surrender requirements also face delays in settlements, further complicating the financial landscape.

A significant concern is the issuance of government securities, such as Treasury Bills (TBs), to settle these debts. These TBs accrue interest, adding strain to the national budget and increasing the total amount owed.

When recipients liquidate these TBs, they often do so at discounts exceeding 50%, which inflates the money supply and undermines the contractionary monetary policy, creating additional layers of value extraction within an already porous system.

The inflated costs of primary contracts, often three to five times the actual cost, are another critical issue. Suppliers inflate prices to hedge against exchange losses, anticipating liquidation of future payments on the parallel market.

Additionally, rent-seeking behaviours exacerbate the problem, with inflated costs covering payments to intermediaries who facilitate contract awards and Treasury personnel who prioritize certain payments.

These dynamics defer the inevitable pressure on the currency. By accumulating due payments, the government reduces local liquidity and suppresses forex demand, artificially propping up the ZiG’s value.

However, if the pace of settling these payments lags behind the assumption of new projects, the gap will widen, increasing the risk of a currency implosion in the near term, particularly as government departments report over-expenditures.

Looking ahead, the government’s 2030 ZiG roadmap signals a strong push to favour the local currency over foreign currencies, which could amplify the impact of a potential currency implosion if not aligned with the reality of outstanding payments.

While the era of rampant inflation and currency hedging appears to have subsided, with hard currency gaining utility, businesses must seize current opportunities.

Strong export performance and improvements in the balance of payments (BOP) present avenues for growth, while increasing informalization offers opportunities for financial inclusion and value linkages.

 Businesses should move beyond aggressive value preservation strategies and capitalize on these developments to ensure resilience in an evolving economic environment.

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