Inflation falls to 4,1% as Zimbabwe hits single-digit milestone

STAFF WRITER
Zimbabwe’s year-on-year inflation in the local currency, Zimbabwe Gold (ZiG), has fallen to single digits for the first time since 1997, settling at 4,1 percent in January.

At the same time, annual inflation in the United States dollar has declined sharply to 1 percent as of January, marking a significant step towards durable macroeconomic stability — a critical foundation for sustainable economic growth and the attainment of Vision 2030 of a prosperous and empowered upper middle-income society.

The sustained disinflation has largely been driven by robust economic policies introduced by the Second Republic under the leadership of President Mnangagwa since late 2017.

In a statement yesterday, Finance, Economic Development and Investment Promotion Minister Professor Mthuli Ncube described the achievement as “a historic milestone for Zimbabwe after nearly three decades since the country recorded single-digit inflation in domestic currency”.

“This is a result of concerted and consistent efforts by the Ministry of Finance, Economic Development and Investment Promotion and the Reserve Bank of Zimbabwe through the implementation of complementary fiscal and monetary policies,” he said.

“Implementation of prudent fiscal policy over the past few years, and complementary monetary policy since the introduction of ZiG in April 2024, has resulted in macroeconomic stability.”

The ZiG is backed by gold and foreign currency reserves, with both reserve money and broad money fully covered by foreign currency assets.

Prof Ncube said Government has successfully accumulated foreign asset reserves backing the ZiG, rising from about US$276 million in April 2024 to US$1,2 billion by the end of December last year.

He noted that prices of most consumer goods — including bread, mealie meal, detergents, beef, tea, milk, lotions and other essentials — have remained largely unchanged over the past 12 months.

According to Prof Ncube, price stability is critical for both citizens and businesses.

“For citizens, stable prices preserve buying power of incomes and protect savings. For business, it enables long-term planning, reduces operational costs and enhances profitability.

“This also eliminates opportunities for arbitrage and speculation which distorts the macro-economic environment. In addition, stability promotes national savings and investment and attracts foreign direct investment, which are essential for creating jobs and growing the economy,” he said.

Price stability is generally defined as low and stable inflation, typically within single-digit levels.

Last year, Prof Ncube expressed confidence that single-digit inflation would be achieved by the end of the first quarter of this year, as it was among Government’s key policy objectives.

The challenge now, he said, is to sustain the milestone throughout the year and beyond as part of the broader macro-economic stabilisation framework.

He also challenged Zimbabweans to have confidence in and accept the ZiG as it preserves value and serves as an acceptable medium of exchange.

“Businesses and investors can now implement their long-term plans with certainty,” he said.

“Zimbabwe is now aligned with the SADC Macro-economic Convergence Primary Benchmarks namely, budget deficit, current account deficit and inflation (target range of 3–7 percent).”

Looking ahead, Prof Ncube said Government remains committed to entrenching price stability through continued implementation of well-coordinated fiscal and monetary policies, which are critical to achieving Vision 2030 and meeting regional and international obligations.

“To further guarantee the stability going forward, there is also need for all stakeholders, particularly business and labour, to work closely with Government to entrench stability.

“Specifically, business should exercise restraint in price setting, while workers should align their salary adjustment requests to inflation developments.

“On our part as Government, we have pegged salaries of civil servants to USD, therefore changes in exchange rate and inflation are embedded,” he said.