Zim’s economy poised for a stronger 2026

LIVINGSTONE MARUFU / CLOUDINE MATOLA

Zimbabwe’s economy is heading into 2026 on its strongest footing, buoyed by a rare stretch of price stability with annual inflation falling into single digits for the first time in nearly 30 years, a milestone that marks a rare phase of macroeconomic stability for an economy long battered by hyperinflation, currency instability and policy uncertainty, Business Times can report.

The improved outlook has been underpinned by the gold-backed Zimbabwe Gold (ZiG) currency, which authorities say has helped restore confidence and anchor prices, while economists cautiously welcome signs of macroeconomic discipline.

As growth prospects brightens, however, policymakers face mounting pressure to consolidate reforms and address lingering structural weaknesses to sustain the gains.

Annual inflation in the Zimbabwe Gold (ZiG) currency fell sharply to 4.1% in January 2026, down from a peak of 95.8% in July 2025, while United States dollar inflation slowed to 1%, according to official data.

The weighted year-on-year inflation rate declined to 1.8% from 13.3%, underscoring a broad-based disinflation that authorities say reflects tighter fiscal discipline and improved coordination between monetary and treasury policy.

The milestone follows 16 months of relative stability in the ZiG — a gold- and foreign-currency-backed unit introduced in April 2024 after years of exchange-rate volatility and repeated currency collapses that eroded public confidence and savings.

The Reserve Bank of Zimbabwe (RBZ) has maintained a tight monetary stance, keeping interest rates positive in real terms, a critical condition for savings mobilisation, investment confidence and financial system stability.

Zimbabwe has now achieved single-digit inflation in both local and US dollar terms, a feat last recorded in the mid-1990s, marking what policymakers describe as a turning point in the country’s long battle against price instability, even as economists caution that sustaining growth, restoring confidence and deepening structural reforms remain key challenges for 2026.

Speaking at a 2026 Economic Outlook breakfast meeting hosted by Business Times in partnership with Africa Economies Development Strategies (AEDS), RBZ Deputy Governor Dr Innocent Matshe said macroeconomic stability was underpinning projected economic growth of at least 5% in 2026.

“It is an honour to stand before you, discussing the state of our economy and the outlook ahead for this year, buoyed by the start of National Development Strategy (NDS) 2 which aims to bolster the nation’s aspirations of becoming a Prosperous and Empowered Upper Middle-Income Society by 2030,” Dr Matshe said.

“ZiG inflation is projected to remain low and stable… Actually, we expect a single-digit inflation rate in January 2026 and we project that trend to continue for the rest of the year. Given the conditions on the ground, the outlook is very positive for the country.”

Zimbabwe’s economic momentum has been supported by robust mineral output, favourable agricultural performance, relatively stable global commodity prices, and renewed investment across the mining sector, alongside gradual improvements in the regulatory environment.

He said the central bank will remain vigilant.

“Monetary and financial conditions will be calibrated to underpin the envisaged growth of at least 5%,” Matshe said, adding that policy would remain “prudent, data-driven and supported by effective communication to foster certainty and predictability.

Finance, Economic Development and Investment Promotion Minister Professor Mthuli Ncube described the inflation outcome as historic, crediting sustained fiscal discipline and policy alignment with the RBZ.

“Zimbabwe has reached a milestone in price stability in domestic currency (ZiG) which is now in single digit phase at 4.1% in January 2026… This marks a critical milestone towards durable macroeconomic stability, critical for sustainable economic growth and the achievement of Vision 2030,” Professor Ncube said.

“This marks a historic milestone for Zimbabwe after nearly three decades since the country recorded single-digit inflation in domestic currency.”

Government foreign reserves backing the ZiG have risen to US$1.2bn by end-December 2025, up from US$276 million in April 2024, with authorities insisting that both reserve money and broad money are now fully covered by foreign currency reserves.

Despite the upbeat baseline, economists cautioned that policy slippage, particularly on the fiscal front, could quickly unravel gains.

AEDS executive director Professor Gift Mugano expect annual inflation to remain below 8% underpinned by tight monetary policy and improved coordination between fiscal and monetary authorities.
“The introduction of the Zimbabwe Gold (ZWG) currency in April 2024 marked a watershed turning point of Zimbabwe’s economy (ZWG), ending hyperinflation,” Professor Mugano said.
“Resultantly, from end of September 2024 to present, authorities have exceptionally managed to foster a stable exchange rate which significantly contributed to the disinflation process which has seen month on-month ZWG inflation receding to 0.23% and annual ZWG inflation plummeting to 15.4% by December 2025 from 95.8% in July 2025 (and 4.1% in January 2026).
“This has largely driven by tight monetary policy and coordination with fiscal authorities which has seen treasury managing its own fiscal affairs without resorting to the RBZ,” he said.
“Based on our own estimates, we anticipate annual inflation to (remain) below 8% by April 2026.”

Professor Mugano, however, warned that any return to deficit monetisation would reignite inflation and undermine confidence in the ZiG.

“Fiscal discipline must be non-negotiable and legally entrenched, with zero tolerance for quasi-fiscal operations… Monetary policy should remain data-driven and restrictive until single-digit inflation is decisively achieved,” Mugano said.

He argued that interest rates should remain unchanged throughout 2026 and urged the RBZ to rely more on market-based liquidity instruments rather than administrative controls.

Economist Brains Muchemwa questioned the logic of accelerating a shift toward mono-currency at a time when output indicators are hitting records.

“We have record production in gold, tobacco and wheat. Everything is right. The companies are happy, everyone is happy. Why then would these politicians want to disturb the peace that is happening?” Muchemwa asked.

Others highlighted persistent structural weaknesses.

Economist and Power Tank executive chairman Dr Nigel Chanakira pointed to distress in parts of the formal retail sector and porous borders undermining competitiveness.

“We also see and must acknowledge the retail sector… continuing to struggle. Just one picture of OK Zimbabwe — a number of shops are being closed,” he said.

From the banking sector, Nedbank Zimbabwe treasury, marketing and corporate affairs executive head Latifa Kassim acknowledged policy credibility gains but flagged acute liquidity constraints.

“We need to continue with some cautious optimism… When I look at credit creation and liquidity, the 0.4% growth in loans worries me,” Kassim said, adding that unresolved policy uncertainties and sovereign arrears continue to restrict access to capital.

AEDS chief economist Pretty Nyathi said the disinflation trend creates a window to localise production, deepen value addition and reduce import-driven inflation.

“ZiG is on demand. If you are holding the local currency, you are holding an asset,” Nyathi said, urging the beneficiation of gold and tobacco to strengthen forex earnings.