Zimbabwe ZWG yearly inflation hits 85%

The Confederation of Zimbabwe Industries (CZI) has raised alarm over the country's ZWG inflationary trends, which it says are not aligning with current market interventions, suggesting that Zimbabwe is heading into difficult times unless combative measures are adopted promptly.

The industry's lobby group has also pointed fingers at the recent decision by the Reserve Bank of Zimbabwe (RBZ) to devalue the ZWG currency, blaming it for the soaring local currency annual inflation rates. The RBZ introduced the ZWG in April 2024, positioning it as the long-awaited solution to Zimbabwe's persistent currency crises, with Governor Dr. John Mushayavanhu emphasizing that the currency was supported by minerals and foreign currency reserves.

However, in less than five months, the ZWG faced a significant decline against the US dollar in both the formal and parallel markets. This depreciation prompted the central bank to intervene with a 43% overnight devaluation in an effort to stabilize the currency.

In its latest inflation report, the CZI highlighted the April 2025 ZWG inflation rate of 85.7%, blaming the RBZ's devaluation decision for contributing to the sharp rise. The group pointed out that the high inflation figures reflect the cumulative shocks that impacted month-on-month inflation throughout 2024, particularly due to the September 2024 exchange rate devaluation, which significantly increased the ZiG Consumer Price Index (CPI) and further elevated annual inflation levels.

"The high ZWG inflation largely reflects cumulative shocks that drove month-on-month inflation in 2024. A significant factor was the September 2024 exchange rate devaluation, which substantially increased the ZiG Consumer Price Index (CPI) and, in turn, elevated annual inflation compared to April 2024 levels," the CZI stated.

For businesses, the high inflation poses significant challenges, particularly in relation to the interest rates required to maintain a positive real interest rate. According to the CZI, to achieve a positive real interest rate, lending rates would need to be set around 85%, making it difficult for businesses to access affordable credit.

"Conversely, interest rates below the inflation rate may encourage speculative borrowing. Effective monetary policy will require a delicate balance to mitigate these adverse effects," the group said.

The business group also noted the rising premium on the parallel market starting on April 17, 2025, as the ZWG continued to depreciate on the black market, even as it remained stable in the formal market. Data comparisons between March 2025 and April 2025 show a slight increase in the premium from 25% to 28%, respectively.

"An increasing parallel market premium distorts price signals to both businesses and consumers. The recent announcement that gold coins are now available was expected to absorb any pressure for ZWG to depreciate, as holders of ZWG can realize a higher value from buying gold coins at a time when gold prices are increasing," the CZI explained.

The business group had hoped that the introduction of gold coins would help stabilize the local currency, but the rising parallel market premium suggests otherwise. The CZI had expected the premium to decrease, not increase, as the coins were seen as a buffer against depreciation pressures.

As the situation develops, CZI has called for timely market interventions to prevent further economic instability, urging the government to consider alternative measures to contain inflation and restore market confidence in the ZWG.