Zimbabwe’s central bank has reiterated its commitment to maintaining a tight monetary policy stance in 2025, with the goal of stabilising its currency that has depreciated by 48% in the past nine months. Governor John Mushayavanhu has highlighted the importance of high interest rates in curbing inflation, as evidenced by a significant decrease in month-on-month consumer-price increases from 37.2% in October to 3.7% in December. The upcoming 2025 Monetary Policy Statement is expected to provide further details on these efforts and introduce additional policies to transition the economy from stability to growth.
Despite facing challenges similar to previous currency initiatives, such as the preference for the U.S. dollar among residents, the gold-backed ZiG has been introduced as the latest currency in Zimbabwe. However, the majority of transactions in the country still occur in the U.S. dollar, indicating a lack of confidence in the new currency.
To address this issue and stabilise the ZiG, the Reserve Bank of Zimbabwe has increased its key interest rate to 35% to combat inflation and strengthen the currency. Additionally, the Treasury has forecasted a 6% economic expansion for the year, driven by improvements in the agricultural sector and growth in the iron and steel industries.
In late 2024, the central bank launched the Targeted Finance Facility (TFF) to provide financing to productive sectors and stimulate economic growth without creating new money that could lead to inflation. The TFF aims to increase the use of the ZiG in both physical and electronic forms, making transactions more convenient for the public. Electronic transactions through the Real-Time Gross Settlement system already account for 40% of activities in the country.
Despite ongoing challenges stemming from years of economic mismanagement, Governor Mushayavanhu remains optimistic about Zimbabwe’s economic recovery. The central bank is focused on building upon recent successes in inflation control and currency management to support sustainable economic growth. The upcoming monetary policy statement is expected to outline additional measures to strengthen the economy and facilitate the transition to long-term growth.
