ZiG inflation rises to 92%

Zimbabwe's annual inflation measured in the local currency (ZiG) surged to 92.1% in May 2025, up from April's 85.7%, signaling growing challenges for the Reserve Bank of Zimbabwe (RBZ) in containing the rising cost of living, Business Times reports. The inflation spike has been primarily driven by increased prices of food and essential goods.

In sharp contrast, inflation for goods priced in United States dollars eased slightly to 13.9% in May from 14.4% in April, highlighting the persistent dual-currency dynamics within the economy.

Several economists warn that the upward inflation trend in ZiG is likely to persist until at least August unless the government implements effective policy measures.

Economist Dr. Prosper Chitambara attributes the persistent inflation to the volatile local currency and price pressures across key sectors.

"We expect ZiG inflation to continue rising probably until August this year if the exchange rate remains relatively stable. There has been mounting pressure on food prices, fuel, utilities, housing, and energy, which have all contributed to this inflation," Dr. Chitambara explained. "Price stability depends heavily on maintaining exchange rate stability alongside controlling money supply growth. The authorities must uphold tight monetary and fiscal policies, rein in unsustainable money supply expansion, regulate public spending, and improve its efficiency."

Dr. Chitambara emphasized the need for coordinated monetary and fiscal policy measures, cautioning that weaknesses in either could undermine efforts to tame inflation.

Economist Vince Musewe noted that inflation is largely driven by expectations shaped by various economic and political factors.

"Exchange rate fluctuations, higher costs of doing business, and import expenses all influence final consumer prices. But political uncertainties and doubts about the future play a significant role in pushing prices upward," Musewe said.

Malone Gwadu, another economist, pointed out that the inflation surge reflects the lingering impact of the local currency devaluation last September.

"The year-on-year comparison reflects the effects of the September 2024 ZiG devaluation, which led to widespread price adjustments. Additional cost drivers include energy alternatives like diesel power and increased compliance costs, which businesses have passed on to consumers," Gwadu said. "While monetary authorities have managed inflation and exchange rates reasonably well, they now need to focus on stimulating growth. The current policies are dampening aggregate demand and economic activity, risking a recession."

Economist Tonny Hawkins highlighted distortions in inflation data due to currency changes and devaluation.

"The year-on-year inflation figures were distorted by the switch to the new ZiG currency and the September devaluation. The USD inflation figures do not fully capture real dollar prices but reflect weaker nostro dollars," Hawkins said. "Inflation in ZiG prices for 2025 stands at 12.7%, with producer prices up 5.4% and the PDL rate at 10.6%, all within the official target range. Going forward, year-on-year inflation will rise until August before slowing, but monthly inflation will increase due to higher import costs, government spending, and currency depreciation. Monetary authorities continue to manipulate exchange rates and build arrears, which they view as part of monetary policy."

As Zimbabwe wrestles with this inflationary surge, experts urge a delicate balancing act of prudent monetary and fiscal policies to restore price stability without stifling economic growth. Without decisive action, the cost of living could continue to erode the purchasing power of many Zimbabweans in the months ahead.