• Annual inflation in ZiG terms dropped to 82.7% in September 2025 from 93.8% in August, with monthly inflation turning deflationary at -0.2%
• In USD terms, annual inflation eased to 13.4% from 14.2%, with stable monthly rates reflecting dollarization's buffering effect against imported price shocks
• RBZ's 35% lending rate, fiscal consolidation, and digital payment reforms support disinflation

Harare- Zimbabwe's economy, battered by decades of hyperinflation and currency instability historically, has continued showing tentative signs of stabilisation with September inflation nosediving in both ZiG and US dollar terms according to the latest data from the Zimbabwe National Statistics Agency (Zimstat).

The economy posted an impressive 11% year-on-year growth in Q2 2025, driven by agricultural and mining rebounds, while foreign currency inflows surged to $10.4 billion by August, up from $8.2 billion in 2024. The balance of payments flipped from a $501 million deficit to a $1.3 billion surplus, bolstering reserves to $900 million in September from $700 million earlier in June.

Zimbabwe’s goods trade balance also which swung to a modest $7.0 million surplus in August 2025, the first such monthly surplus since at least 2019, when annual deficits dominated amid chronic import reliance has positively influenced September 2025’s inflation performance by alleviating external price pressures in a historically deficit-prone economy.

This August shift, with exports edging up 0.3% to $878.2 million (bolstered by gold and tobacco) and imports dipping 1.7% to $871.1 million amid domestic agricultural rebounds (20% Q2 growth) and reduced non-essential demand, reduced FX strain and import costs.

These dynamics curbed pass-through inflation, directly aiding the ZiG’s annual rate drop to 82.7% and monthly deflation of -0.2% in September by easing staple import dependencies and aligning local pricing. In USD terms, it reinforced the 13.4% annual stability through better import cover.

In ZiG terms, the gold-backed currency introduced in April 2024 saw annual inflation ease to 82.7% in September, down from 93.8% in August and 95.8% in July, with monthly inflation turning deflationary at -0.2%, reversing August’s 0.4% rise. This shift, driven by declines in food and non-alcoholic beverages (over 40% of the CPI basket), reflects seasonal harvest surpluses and improved supply chains following a 15% agricultural output drop in 2024 due to an El Niño-induced drought.

In USD terms, where over 80% of transactions occur in Zimbabwe’s dollarised economy, annual inflation dipped to 13.4% from 14.2%, with monthly rates steady at zero, highlighting the dual-currency system’s dynamics: ZiG amplifies local price swings, while USD insulates against imported shocks.

The Reserve Bank of Zimbabwe (RBZ) targets 20% ZiG annual inflation by December 2025, banking on sustained policy discipline and high gold prices. The ZiG’s disinflation stems from three factors amplified by 2025’s economic dynamics: a 20% agricultural rebound in Q2 lowering staple prices (maize down 10-15%), a $10.4 billion inflow surge and $1.3 billion balance of payments surplus stabilising the ZiG at 34 per USD in parallel market, and demand moderation from 2024’s 2% growth slowdown, though this risks deepening poverty (projected at 42% extreme deprivation in 2025).

The 11% Q2 growth, outpacing the RBZ’s 6% full-year forecast, reflects agricultural recovery (20% growth), mining (gold and nickel mattes exports), and manufacturing (8% growth), with electricity stabilisation aiding output.

Foreign currency inflows of $10.4 billion by August, driven by record tobacco auctions and mining exports, fuelled the $1.3 billion balance of payments surplus, a $1.8 billion swing from 2024’s $501 million deficit. These external gains have boosted reserves, enhanced import cover to 3.5 months, and narrowed the parallel market premium to 22% from 50%, directly supporting September’s inflation performance.

The agricultural surge drove ZiG deflation by flooding markets, while inflows and the surplus curbed import-driven price pressures, stabilising the ZiG and aligning USD pricing.

The projected $1.5 billion in unpaid obligations to exporters and contractors, up from $1.2 billion earlier in 2025, stems from delayed FX payouts and stalled infrastructure contracts, linked to a 30% mandatory FX surrender requirement that effectively taxes exporters.

Debt servicing consumes 25% of revenues, limiting arrears clearance and deterring FDI ($500 million annually). These arrears threaten September’s inflation gains by risking supply chain disruptions, potentially reversing food price declines and fuelling cost-push inflation in ZiG terms.

The balance of payments surplus mitigates some pressure by enhancing FX availability, but inefficiencies in allocation sustain the 22% parallel premium, which could widen, undermining the RBZ’s 20% inflation target and casting doubt on the ZiG’s stability.

The RBZ’s 35% benchmark lending rate and cessation of quasi-fiscal operations have slashed money supply growth from triple digits in 2024 to low double-digits in 2025, stabilising the ZiG. Fiscal consolidation via VAT hikes, smuggling crackdowns, and taxing COVID-era allowances has boosted revenues to 18% of GDP, enabling deficit financing through Treasury bills.

Digital payment reforms (150,000+ POS devices) have curbed cash hoarding, supporting price stability. These policies, amplified by the balance of payments surplus and inflows, underpin September’s disinflation, but the $1.5 billion arrears signal fiscal strain. Sustaining the 20% inflation target requires addressing arrears, alongside consistent monetary discipline.

Therefore, September 2025’s inflation performance, ZiG at 82.7% annually and -0.2% monthly, USD at 13.4% reflects progress driven by Q2’s 11% growth, $10.4 billion inflows, and a $1.3 billion balance of payments surplus, alongside policy rigor. However, the projected $1.5 billion arrears highlight fiscal vulnerabilities that could destabilize the ZiG and erode growth’s benefits. The ZiG eyes single-digit inflation if conditions hold, while USD remains a buffer, but Zimbabwe’s path remains fraught with fiscal and external uncertainties.