• ZiG inflation fell to 4.1% in January 2026 mainly due to strict RBZ control
• Strong USD inflows from gold and tobacco exports helped stabilise the exchange rate, limiting pass-through inflation despite widening structural pressures
• Inflation remains fragile as fiscal arrears, delayed payments, and heavy dollarisation constrain policy flexibility and risk reversing gains if liquidity is loosened

Harare - Zimbabwe’s gold-backed currency (ZiG) recorded a year-on-year inflation rate of 4.1% in January 2026, down sharply from 15.0% in December 2025, marking the country’s first sustained single-digit inflation outcome since 1997, according to the Zimbabwe National Statistics Agency (ZimStat).

This performance is largely attributed to the Reserve Bank of Zimbabwe’s disciplined monetary framework, which has imposed strict control over ZiG liquidity while aggressively managing the foreign-exchange market.

The outcome signals a dramatic turnaround for a monetary system long associated with volatility, repeated currency collapse, and chronic price instability.

At the core of the disinflation has been the RBZ’s decision to close off traditional inflationary channels. By refraining from printing both physical ZiG notes and electronic balances, the central bank has engineered an acute scarcity of local currency.

This scarcity has mechanically suppressed price growth. In simple terms, inflation has eased because there is very little ZiG in circulation to exert upward pressure on prices.

The tight liquidity stance has coincided with a favourable external environment that has indirectly reinforced inflation control.

Record-high international gold prices have materially strengthened Zimbabwe’s foreign-exchange position. Gold export receipts surged to US$4.1 billion in November 2025, almost doubling 2019 and 2020 receipts and nearly eclipsing combined outputs for 2020 and 2021. These inflows provided a steady supply of hard currency into the formal system.

Combined with record tobacco exports 352.7 million kilograms in 2025, generating US$1.2 billion in earnings foreign-currency inflows significantly boosted USD liquidity in the domestic market.

Improved USD availability reduced pressure on the exchange rate, narrowing the premium between the official and parallel markets. This compression has been critical in containing exchange-rate pass-through into domestic prices, reinforcing the disinflation trend.

However, inflation dynamics have not improved uniformly across economic actors. Exporters remain exposed to structural distortions linked to the 30% export surrender requirement, which obliges firms to convert foreign earnings at an overvalued official rate.

To maintain USD liquidity, exporters are often forced back into the parallel market. The arithmetic remains punishing: an exporter surrendering US$20 million at the official rate and repurchasing USD at a 40% premium effectively loses at least 20% of gross revenue, eroding margins and discouraging reinvestment.

At the same time, inflation containment has been reinforced by delayed fiscal outlays. Concerns persist over late payments to miners and contractors, particularly outside the gold sector.

Bitumen World, one of Zimbabwe’s largest construction contractors, cut jobs in August 2025 due to severe cash-flow pressures stemming from unpaid government invoices.

Masimba Holdings similarly pivoted toward private-sector clients to mitigate state payment risks. These deferred payments suppress ZiG liquidity in the economy, indirectly supporting low inflation but at the cost of reduced activity and rising corporate stress.

Platinum group metal exporters and civil-works contractors continue to face payment lags, raising questions about the durability of the current inflation equilibrium.

Fiscal arrears to domestic suppliers have now exceeded US$1 billion and continue to accumulate, creating a significant contingent liability. Any sudden settlement of even a portion of these arrears in ZiG could inject large volumes of unwanted local-currency liquidity into the market, triggering a depreciation spiral and rapidly reversing recent disinflation gains.

This risk overhang explains the RBZ’s extreme caution. The current liquidity shortage is entirely discretionary and remains under direct central-bank control.

Borrowing rates are being maintained at 35%, deliberately choking off credit creation to prevent speculative attacks on the currency. Any premature easing of liquidity conditions risks reigniting the very inflationary dynamics the authorities have worked to suppress.

Fiscal space to resolve arrears without destabilising inflation remains limited. While efforts to formalise the informal sector are generating incremental revenue, they are insufficient to meaningfully expand fiscal capacity over the next five years.

Strong commodity exports support the balance of payments and exchange-rate stability, but they do not automatically translate into budgetary headroom for expenditure without inflationary consequences.

Corporate disclosures further highlight the fragility of the disinflation. Delta Corporation, Zimbabwe’s largest listed company by market capitalisation, reported that nearly 90% of its half-year sales to September 2025 were denominated and settled in US dollars.

This highlights the extent to which price discovery and transactional confidence remain firmly USD-anchored, limiting the depth of ZiG demand despite low headline inflation.

Traditional macroeconomic frameworks would suggest that a clear disinflationary path should allow for a calibrated reduction in policy rates to stimulate credit growth and encourage voluntary holding of ZiG balances.

In Zimbabwe’s case, however, unresolved fiscal arrears, suppressed liquidity, and entrenched dollarisation constrain such policy flexibility, rendering the current low inflation outcome stable but highly conditional.

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