Sharp fall in Zimbabwe’s inflation

LIVINGSTONE MARUFU

Zimbabwe’s annual inflation in the ZiG (ZWG) currency plunged by 50 percentage points to 32.7% in October, from a peak of 82.7% in September, marking one of the sharpest slowdowns in recent years.

The steep decline underscores the impact of the Reserve Bank of Zimbabwe’s (RBZ) tight monetary stance, which has sharply curtailed money supply to stabilise the local currency and contain inflationary pressures.

Inflation refers to the general increase in the prices of goods and services over time, measured by indices such as the Consumer Price Index (CPI) or the Producer Price Index (PPI). When inflation rises, the purchasing power of money declines, each unit of currency buys fewer goods and services than before.

However, a fall in inflation does not mean prices are dropping.

It means that prices are still rising, but at a slower rate. In other words, while prices surged rapidly in September, they continued to increase in October, only more gradually.

As long as the rate of change remains positive, the overall price level keeps climbing.

This distinction is critical.

A slowing rate of inflation, known as disinflation, signals stabilisation, not deflation.

Deflation occurs when prices actually decline. Zimbabwe’s current trend, therefore, represents disinflation, reflecting a deceleration in price growth rather than an outright fall in prices.

Even so, the sharp drop in inflation is a positive signal for the economy, suggesting that price growth is being brought under control.

This development could help ease the cost of living, strengthen business confidence, and lay the groundwork for a more durable economic recovery.

According to the Zimbabwe National Statistics Agency (ZimStat): “The ZWG year-on-year inflation rate (annual percentage change) for the month of October 2025, as measured by the all-items ZWG Consumer Price Index (CPI), was 32.7%. This means that prices increased by an average of 32.7% from October 2024 to October 2025.”

ZimStat data shows that the ZWG CPI stood at 190.50 in October 2025, compared with 191.18 in September and 143.59 in October 2024. The month-on-month inflation rate fell to -0.4% in October, down by 0.2 percentage points from September—indicating that, on average, prices slightly declined between the two months.

Economists attribute the disinflation to the RBZ’s strict liquidity management and exchange rate discipline.

“Month-on-month inflation has slowed consistently since mid-year, which is evidence that monetary reforms are having a positive impact,” said economist Tinevimbo Shava.
“Of course, the annual figure remains high at 32.7%, but what matters is the downward trend, which shows policy traction. If maintained, this will help restore confidence in the ZiG over time.”

Meanwhile, inflation in US dollar terms remained relatively stable. ZimStat reported that annual inflation measured in US$ eased to 13% in October, from 13.4% in September, while month-on-month inflation edged up slightly to 0.3%, reflecting modest price adjustments in the dollarised segment of the economy.

The Confederation of Zimbabwe Industries (CZI) expressed optimism that the RBZ could meet its 2025 inflation target of bringing annual ZiG inflation below 20% by year-end.

“If ZiG month-on-month inflation continues to grow by less than 1% in the next four months to December 2025, annual inflation is projected to be less than 20% in December,” the CZI said in its latest report.

While disinflation supports macroeconomic stability, analysts warn that the RBZ’s tight liquidity conditions, though effective in curbing inflation, could dampen industrial activity and slow growth if sustained for too long.

“In the long term, monetary policy will need to gradually ease liquidity conditions as stability becomes more sustainable,” CZI added.

The organisation also observed that sustained price stability enhances confidence in the ZiG, broadening its use beyond a mere transactional currency. Several firms that had previously preferred US dollar-only dealings are now accepting ZiG payments to settle part of their monthly obligations.