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.
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.
