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RBZ's market-determined exchange rate spurs ZiG stability
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The Reserve Bank of Zimbabwe (RBZ)'s adoption of a market-determined exchange rate system has ushered in a new era of stability and confidence in the Zimbabwe Gold (ZiG) currency, with the recent removal of rigid exchange rate controls playing a central role in maintaining price equilibrium.
The shift, formalised through Statutory Instrument 34 of 2025, repealed regulations that had previously mandated the use of the RBZ's official interbank rate for pricing. Despite initial concerns over potential price surges, prices have remained steady, and ZiG has held firm on the back of a tightened monetary policy and a surge in foreign reserves.
Major retail chains including TM Pick n Pay and OK Zimbabwe have kept their exchange rates relatively stable, pegging the ZiG at US$1:ZiG32 and US$1:ZiG31.95, respectively, signaling confidence in the RBZ's new framework and the resilience of the currency.
RBZ Governor Dr John Mushayavanhu confirmed the ZiG's exchange rate has remained steady around ZiG26.8 to the US dollar, with the parallel market premium contained below 20 percent — a significant milestone for a currency launched just over a year ago.
"The exchange rate is expected to remain stable, anchored on the current tight monetary stance, optimal money supply growth, and a robust foreign currency reserve accumulation strategy," said Dr Mushayavanhu.
Since the recalibration of monetary policy in April 2024 and the launch of ZiG, Zimbabwe has seen its foreign currency reserves grow from US$285 million to US$629 million as of March 2025. This has been attributed to three primary factors: enhanced export surrender requirements (increased from 25% to 30%), strong foreign currency inflows, and strict monetary discipline.
"The Reserve Bank has various open market instruments in its monetary policy toolkit to ensure continued stability," he said. "Our strategy includes using the bank policy rate, statutory reserves, and open market operations (OMO) to suppress speculative activity and ensure liquidity is maintained at optimal levels."
Dr Mushayavanhu also noted that the parallel market's influence has diminished, with speculative pressures easing due to the improved functionality of the formal foreign exchange market. "The Reserve Bank will continue to intervene where necessary to manage any shocks and to ensure that all legitimate foreign invoices are cleared."
The Confederation of Zimbabwe Retailers (CZR) president Dr Denford Mutashu echoed the central bank's optimism, praising the disciplined monetary policy for bringing inflation under control and boosting market confidence.
"By anchoring the ZiG to a basket of reserves, including gold and foreign currency, and limiting money supply growth, the RBZ has reduced speculative behaviour and stabilised the exchange rate," said Dr Mutashu.
Monthly inflation stood at 0.6% in April 2025, slightly up from -0.1% in March, further indicating a trend of controlled price movement since the ZiG's introduction.
Looking ahead, the RBZ plans to deepen and refine the foreign exchange market, with new monetary tools expected to be introduced in response to evolving economic dynamics. The central bank's proactive approach aims to solidify long-term currency stability, inflation management, and financial sector integrity.
With ZiG showing sustained strength and market-driven mechanisms now in place, Zimbabwe's monetary authorities believe the groundwork has been laid for a more predictable and investor-friendly economic environment.
The shift, formalised through Statutory Instrument 34 of 2025, repealed regulations that had previously mandated the use of the RBZ's official interbank rate for pricing. Despite initial concerns over potential price surges, prices have remained steady, and ZiG has held firm on the back of a tightened monetary policy and a surge in foreign reserves.
Major retail chains including TM Pick n Pay and OK Zimbabwe have kept their exchange rates relatively stable, pegging the ZiG at US$1:ZiG32 and US$1:ZiG31.95, respectively, signaling confidence in the RBZ's new framework and the resilience of the currency.
RBZ Governor Dr John Mushayavanhu confirmed the ZiG's exchange rate has remained steady around ZiG26.8 to the US dollar, with the parallel market premium contained below 20 percent — a significant milestone for a currency launched just over a year ago.
"The exchange rate is expected to remain stable, anchored on the current tight monetary stance, optimal money supply growth, and a robust foreign currency reserve accumulation strategy," said Dr Mushayavanhu.
Since the recalibration of monetary policy in April 2024 and the launch of ZiG, Zimbabwe has seen its foreign currency reserves grow from US$285 million to US$629 million as of March 2025. This has been attributed to three primary factors: enhanced export surrender requirements (increased from 25% to 30%), strong foreign currency inflows, and strict monetary discipline.
"The Reserve Bank has various open market instruments in its monetary policy toolkit to ensure continued stability," he said. "Our strategy includes using the bank policy rate, statutory reserves, and open market operations (OMO) to suppress speculative activity and ensure liquidity is maintained at optimal levels."
Dr Mushayavanhu also noted that the parallel market's influence has diminished, with speculative pressures easing due to the improved functionality of the formal foreign exchange market. "The Reserve Bank will continue to intervene where necessary to manage any shocks and to ensure that all legitimate foreign invoices are cleared."
The Confederation of Zimbabwe Retailers (CZR) president Dr Denford Mutashu echoed the central bank's optimism, praising the disciplined monetary policy for bringing inflation under control and boosting market confidence.
"By anchoring the ZiG to a basket of reserves, including gold and foreign currency, and limiting money supply growth, the RBZ has reduced speculative behaviour and stabilised the exchange rate," said Dr Mutashu.
Monthly inflation stood at 0.6% in April 2025, slightly up from -0.1% in March, further indicating a trend of controlled price movement since the ZiG's introduction.
Looking ahead, the RBZ plans to deepen and refine the foreign exchange market, with new monetary tools expected to be introduced in response to evolving economic dynamics. The central bank's proactive approach aims to solidify long-term currency stability, inflation management, and financial sector integrity.
With ZiG showing sustained strength and market-driven mechanisms now in place, Zimbabwe's monetary authorities believe the groundwork has been laid for a more predictable and investor-friendly economic environment.
Source - herald
