Africa Economic Development Strategies (AEDS)

AEDS Executive Director, Professor Gift Mugano (GM) speaks to the Governor of the Reserve Bank of Zimbabwe Dr John Mushayavanhu (JM) regarding the prevailing economic stability and the road map to Monocurrency.

To the surprise of market watchers and economic commentators, the ZiG has sustained stability for the last 15 months. What are the key drivers of this stability?

The Reserve Bank has implemented bold monetary policy measures to foster price, currency and exchange rate stability geared towards containing inflationary and exchange rate pressures since 2024.

Precisely, the Reserve Bank has walked the talk through implementing a prudent monetary policy stance anchored on optimal money supply management, maintaining positive real interest rates, ensuring a floating exchange rate system and robust accumulation of foreign currency reserves to back the ZiG currency.

The following are the key drivers supporting the current sustained stability in the economy:

Prudent money supply management with reserve money growth calibrated to support the envisaged growth of 6.6% and a disinflation program expected to bring inflation to low and sustainable levels.
Effective liquidity management aimed at supporting growth of the productive sectors while curbing speculation on the local currency.
Maintenance of positive real interest rates which has curbed speculative borrowing while supporting productive borrowing and fostering a savings culture. This was buttressed by the prudent utilisation of an inflation neutral Targeted Finance Facility (TFF) for productive sectors.
Coordination and complementarity between the Reserve Bank and Ministry of Finance at all levels including Liquidity and Cash Flow Management Committees has allowed synchronicity of payments and support of optimal liquidity management.
Refined floating exchange rate based on a Willing Buyer Willing Seller (WBWS) framework which has been supported by removal of trading limits and clarifications on trading margins.
The smooth functioning of the interbank market has also benefited from increased foreign currency receipts, which amounted to US$16.2 billion between January and December 2025.
The increased foreign currency inflows allowed the Reserve Bank to effectively use surrender requirements to strategically intervene on the interbank market to the tune of US$1.34 billion since April 2024. This ensured that all bonafide import invoices have been met.
Accumulation of foreign reserves to about US$1.2 billion, which corresponds to 1.5 months of import cover resulting in increased confidence in local currency and stability of the exchange rate.
The increased foreign currency reserves have increased the cover for reserve money and broad money to about 6- and 2-times cover, respectively.
Furthermore, the non-recourse to Central Bank financing by Treasury in 2025 has been key in underpinning the obtaining sustained stability.
The above measures have been key in reducing annual ZiG inflation, which fell to 15% in December 2025.
Importantly, the decline in inflation also resulted in a stable exchange rate with the parallel market premium contained to around 20% for the greater part of 2025.
Overall, the Reserve Bank’s commitment to prudent monetary policy and walking the talk has supported greater confidence in local currency. The predictability in the monetary policy assisted in improving central bank trust and credibility which has enhanced public confidence in the Reserve Bank.
Going forward, the Reserve Bank will continue to walk the talk in implementing prudent monetary policy to durably anchor inflation expectations needed to entrench trust, confidence and credibility in the Bank.

As AEDS, our economic estimates based on economic modelling shows that the economic stability will continue into the 2026 and beyond characterised by a single digit annual inflation by April 2026, both official and parallel exchanges rates remaining unchanged and policy rate remaining unchanged for the larger part of 2026. Do you share the same observations as the Central Bank? Explain.

Yes, the Reserve Bank largely agrees with this view. Annual inflation is expected to continue decelerating into 2026, reaching single-digit levels even earlier than your projected April 2026.
Given the current inflation dynamics, including a better performance in 2025 and the envisaged growth of money supply in 2026, inflation is projected to be in single digit levels during the first quarter of 2026.

In our analysis, fiscal pressures remain a primary risk on economic stability. As the advisor to the Government of Zimbabwe and Treasury, is this a shared view and what must be done to mitigate this risk?

Accommodating fiscal activities tends to impose inflationary pressures and exchange rate volatility in any economy. It is in this regard, that central Banks should always be cognisant and effectively monitor developments in fiscal positions to avoid negative spillovers on money supply and inflation.
The Reserve Bank is committed to ensuring complementarity between the fiscal and monetary policy. This complementarity is already bearing fruit as government has not been accommodated by the Central Bank during 2025. This trend is expected to continue in 2026, as stated and emphasized in the National Development Strategy (NDS) 2. Moreover, Government has signalled its intention under NDS2 to reduce the amount at which Government can be accommodated by the Central Bank from the current legislated 20% of last year’s previous Government revenue to less than 5% in line with the desired regional macroeconomic convergence targets under the SADC.

There are allegations that the Reserve Bank of Zimbabwe is not paying export retention on time. What is the Central Bank’s position on the payment of export retention?

The current export surrender requirement framework which is pegged at 30% allows for 12.5% to be used by the Reserve Bank to intervene on the interbank foreign exchange market, 5% is to support the build-up of foreign reserves needed to back the ZiG and the remaining 12.5% is allotted to government to service external debt obligations.
The Reserve Bank has been promptly honouring the ZiG equivalent of the 17.5% of export receipts surrendered to the Bank.
However, delays have been reported by some exporters regarding the surrendered portion to Government. Government is however, working with the companies to establish a framework to resolve the issue.

Over the years, the Government of Zimbabwe hurriedly introduced local currency without priori requirements. As AEDS, we noted with appreciation that this time around the Central Bank has outlined the minimum requirements for the introduction of mono-currency. For the sake of market watchers and the general public, what are these minimum conditions? To date, what progress have you made in achieving these set out conditions?

Government has embarked on a roadmap to a mono-currency, which is anticipated to culminate in the exclusive use of ZiG for settling domestic transactions.
The roadmap outlines the conditions precedent for the successful transition to mono-currency. These minimum requirements include the following.
oDurable macroeconomic stability, characterized by low and stable inflation at single-digit levels.
oAdequate foreign currency reserves of at least 3 - 6 months of imports cover in the medium to long-term.
oEfficient FX management system that promotes ease of access to FX by importers.
oStable exchange rate dynamics with minimum over-/undervaluation of ZiG.
oIncreased demand for local currency (ZiG) – recalibration of the percentage of Government taxes and broadening payment of public sector goods and services in local currency.
oFinancial sector stability.
oEfficient and secure National Payments System to promote ease of payment in ZiG locally.
oFiscal and monetary policy cohesion with non-monetisation of the budget.
Authorities are on a positive trajectory in meeting the conditions precedent and currently key achievements include:

i.Sustained decline in ZiG annual inflation rate from 95.8% in July 2025 to 15% in December 2025, on track to meet single digit inflation in 2026.
ii.Low and stable month on month ZiG inflation averaging 0.4% between February and December 2025.
iii.Stable exchange rate dynamics oscillating around ZiG 26-27 per US$ and narrowing of the exchange rate premium from over 100% to levels around 20% 2025.
iv.Increase in foreign reserve accumulation to about US$1.2 billion representing 1.5 months of import cover, on track to meet 3 – 6 months cover by 2030.
v.The foreign currency reserves is about 6 times cover for ZiG reserve money and almost twice the entire stock of ZiG deposits.
vi.A smooth functioning and efficient interbank market that has enhanced price discovery.
vii.The banking sector remains safe and sound with adequate capitalisation and low levels of non-performing loans well below the international benchmark.
viii.National Payments Systems have remained robust and resilient with an uptime of over 95% to support a smooth and efficient flow of transactions
ix.There has been no accommodation of the fiscal deficit by the Central Bank.

In view of the fact that RBZ deals with the demand side of the economy from a policy perspective, we are of the humble view that MDAs and industry which deals with the supply side must also come up with their respective road maps powered by data metrics or indicators. What is your take on this?

The Reserve Bank agrees with this view. Monetary Policy cannot work in isolation; thus, total buy in by the private sector is required from the supply side. In this regard, the Reserve Bank expects MDAs and industry to largely align with the Monetary Policy to ensure that set targets are met.
Overall, sustained stability of the exchange rate is supported by a strong external sector as reflected by favourable current account position. In this regard, a sustained drive by the industry to support exports while limiting imports through a robust import substitution framework will go a long way in sustaining exchange rate stability.

As AEDS, we are of the humble view that legislating the date for the transition to mono-currency will result is credit squeeze and capital flight. In view of this, we argue for the removal of the currency change over date in favour of a sleepwalk into local currency on the back of increased volume of transactions in local currency powered by foreign currency reserves, fiscal consolidation and stable macroeconomic environment. What is your take on this

The date of 31 December 2030 was enforced in Statutory Instrument 218 of 2023, a measure introduced by Government which was viewed as appropriate at that time.
Nevertheless, the Reserve Bank’s focus is on fully meeting the Conditions Precedent to the introduction of the mono-currency. In this regard, whether a date is gazetted or not is subservient to meeting the minimum requirements of a smooth transition.
The Reserve Bank is pre-occupied with ensuring that the conditions for the mono-currency are successfully met. As such, the transition to mono-currency will be gradual, market-led and anchored on macroeconomic stability.

Martin Kadzere

THE Reserve Bank of Zimbabwe will sustain the push towards using a single currency for all internal transactions, leveraging the broad successes of 2025 as a foundation for economic stability while stressing that the transition will be a multi-stage process rather than an overnight shift.

Representing RBZ Governor Dr John Mushayavanhu at the State of the Economy and 2026 Economic Outlook breakfast meeting in Harare yesterday, deputy governor Dr Innocent Matshe said a domestic currency was a non-negotiable prerequisite for national competitiveness.

Regional independent think-tank, the Africa Economic Development Strategies (AEDS), in partnership with Business Times, organised the breakfast meeting.

Since its introduction on April 5, 2024, as a structured currency backed by gold and foreign currency reserves and building on the fiscal discipline by Government since the advent of the Second Republic and now a high level of monetary discipline, the ZiG has achieved remarkable resilience, tamed inflation and stabilised the exchange rate.

It has strengthened against the US dollar by 1,5 percent since the beginning of the year to ZiG25,590 from ZiG25,9807 to US$1.

Dr Matshe reiterated that the adoption of the ZiG as a mono-currency would be dictated by rigorous economic milestones rather than arbitrary deadlines.

Central to this roadmap is the requirement for durable macroeconomic stability, characterised by low inflation and the accumulation of foreign reserves equivalent to at least 3,6 months of import cover.

This is now on the cards as Zimbabwe moves into sustained positive balance of trade, exporting more than it imports.

To ensure the ZiG succeeds, the RBZ is prioritising a unified exchange rate system, stable currency dynamics and a recalibrated tax framework designed to mandate the payment of public services in local currency.

The transition is further anchored by a “back-to-basics” policy cohesion between the Treasury and RBZ, aimed at maintaining sustainable budget deficits and fostering public trust in the financial system.

Borrowing is now only permitted for that part of the capital budget where there is an immediate new stream of revenue that can be used to service the borrowing.

To support this transition, Dr Matshe said durable, modern and secure banknotes would be released late in the first quarter or early in the second quarter of this year.

“Overall, the Reserve Bank will aim to entrench macroeconomic stability in support of the roadmap to mono-currency and attainment of National Development Strategy 2 objectives of realising a prosperous and empowered upper-middle-income society by 2030,” said Dr Matshe.

He said the public should understand that “what is driving mono-currency is not a date, but the condition in which the economy is rapidly transitioning to mono-currency”.

Zimbabwe legalised the continued use of the multi-currency system until December 31, 2030, providing a clear legal framework for the use of the US dollar alongside the local currency.

The previous deadline of 2025 had created significant policy uncertainty.

Banks were reportedly hesitant to offer long-term US dollar loans extending beyond 2025, which threatened to stifle credit growth in the private sector.

Dr Matshe noted that the central bank’s roadmap is bolstered by several milestones achieved over the past year, with key indicators showing a significant cooling of the economy and a stabilisation of the ZiG.

Annual ZiG inflation plummeted to 15 percent by early last year, beating the initial 30 percent target.

Month-on-month inflation remained stable, averaging 0,4 percent since February 2025. This will shortly see annual ZiG inflation falling into single figures.

Dr Matshe hinted that January annual inflation figures, due next week, could reach single digits, meeting the SADC regional benchmarks of 3 to 7 percent.

Foreign currency receipts reached a record US$16,2 billion in 2025, up from US$13,3 billion in 2024, driven by record gold prices.

This drive in exports, with only modest adjustments in imports, had created the positive trade balance.

The interbank exchange rate remained steady at approximately ZiG26 per US dollar, with the parallel market premium contained below 20 percent.

For the first time in recent history, the RBZ reported zero central bank financing of Government expenditure, a move credited to tight coordination with the Ministry of Finance, Economic Development and Investment Promotion.

“I really need to applaud the Ministry of Finance, Economic Development and Investment Promotion for giving us the space to make sure that we restrict central bank financing of Government expenditure,” said Dr Matshe.

Foreign currency reserves climbed to US$1,2 billion by December 2025, providing 1,5 months of import cover.

The reserves now cover the local reserve money stock approximately six times and represent double the value of all total ZiG deposits in the system.

“The Reserve Bank remains committed to keeping money supply growth in check to ensure durable, low and sustainable inflation,” said Dr Matshe.

He noted that local currency money supply growth fell from 10 percent to an average of just 2 percent in 2025.

Zimbabwe is expected to record a strong current account surplus of about US$1 billion in 2025, double the US$500 million recorded in 2024.

Despite a conservative projection of 5 percent growth for 2026, Dr Matshe suggested the outturn could be significantly higher, following an estimated 6,6 percent growth in 2025.

He warned that the “base might change” if 2025 figures are revised upwards, but maintained that the overarching story is one of a positive trajectory.

AEDS executive chairman Professor Gift Mugano noted that Zimbabwe has maintained exchange rate stability since September 2024, with premiums falling below 20 percent.

“There is no one who is asking about exchange rates on a daily basis or anyone who runs to offload ZiG,” said Prof Mugano.

In terms of ZiG use, he anticipates it will continue to gain a foothold in formal markets, but the US dollar will remain dominant for savings.

Despite a positive baseline forecast, Prof Mugano warns that fiscal policy slippage, if not carefully watched, remains the primary threat to national economic stability.

To safeguard the disinflation trajectory and protect the ZiG, he called for a “non-negotiable” commitment to budget discipline and a zero-tolerance stance on quasi-fiscal operations.

Interest rates should remain restrictive throughout 2026, shifting from administrative controls to market-based liquidity management.

Authorities must prepare for exogenous shocks, Prof Mugano said, including potential oil price hikes driven by geopolitical tensions in the Americas following the US interference in Venezuelan politics, and local climate risks like flooding.

To boost financial intermediation, the RBZ should consider lowering reserve requirements for banks that prioritise lending to agriculture, manufacturing, and SMEs.

Stability must be anchored in real-sector competitiveness rather than demand suppression, ensuring “inclusive growth” that benefits all citizens.

Notably, though, Treasury is already running a tight fiscal policy that involves reducing Government spending, like on luxury vehicles and foreign travel, and controlling quasi-fiscal activities to curb inflation and maintain ZiG stability.

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To the surprise of market watchers and economic commentators, the ZiG has sustained stability for the last 15 months. What are the key drivers of this stability?

In our analysis, fiscal pressures remain a primary risk on economic stability. As the advisor to the Government of Zimbabwe and Treasury, is this a shared view and what must be done to mitigate this risk?

There are allegations that the Reserve Bank of Zimbabwe is not paying export retention on time. What is the Central Bank’s position on the payment of export retention?

In view of the fact that RBZ deals with the demand side of the economy from a policy perspective, we are of the humble view that MDAs and industry which deals with the supply side must also come up with their respective road maps powered by data metrics or indicators. What is your take on this?