Online Reporter
Business Reporter
CONTINUED pricing and exchange rate stability can be guaranteed by the performance of the real sector economy, supported by the fiscal leg to drive demand for the local currency, according to economists.
Experts believe there has been relative stability since the introduction of the Zimbabwe Gold (ZiG) currency on April 5 last year.
The stability is expected to persist during the first half of 2025.
Prices of basic goods have remained largely stable after the Reserve Bank of Zimbabwe (RBZ) rolled out monetary interventions aimed at curbing foreign exchange pressures that had affected the stability of the local currency.
As a result, key commodities, such as maize meal, cooking oil and bread, have maintained almost similar prices into the new year.
Stability is anchored by robust performance of sectors such as financial services, manufacturing, mining and agriculture, among others.
Economist and member of the Reserve Bank of Zimbabwe (RBZ)’s Monetary Policy Committee (MPC) Mr Persistence Gwanyanya said price and exchange rate stability obtaining from the last quarter of 2024 is being driven by the tight monetary policy stance, which is supported by prudential fiscal management.
The measures announced by the RBZ in September 2024 have managed to anchor stability of both the exchange rate and prices.
“We are also pinning our hopes on the performance of the real sector economy for permanent stability. The positive outlook, with projected growth of 6 percent in 2025, gives us confidence of a more stable economy ahead,” he said.
Growth, he said, is expected to be driven by performance of the agriculture sector, which is, however, susceptible to the vagaries of weather conditions.
“This is why the performance of
the real sector economy is important to support stability,” said Mr
Gwanyanya.
While agriculture remains key, other economic sectors such as mining, manufacturing and tourism are equally important.
The tight monetary policy stance, added Mr Gwanyanya, has also sustained price and exchange rate stability.
“While the parallel market ZiG exchange rate had stabilised at around US$1:ZiG40, the tight ZiG conditions are seen as strengthening the local currency.
“While some traders are still quoting US$1:ZiG40, very few trades are happening and we expect further strengthening of the ZiG as stability measures bed down . . .”
Government has also been working on driving demand of the local currency.
Some of the strategic interventions include a directive for all import duties to be paid in local currency, except for luxury items; the transfer of external payment obligations from the RBZ to Treasury; and introduction of the wholesale foreign currency auction for banks.
Further, Treasury has also directed that all Government institutions collect fees and charge in the local currency and that 50 percent of corporate tax payments be made in ZiG.
Economist Dr Prosper Chitambara said stability is largely attributable to the tight liquidity situation currently prevailing in the economy.
“We have seen authorities, both fiscal and monetary authorities, tightening things up as far as the liquidity situation is concerned,” he said.
“So that has largely contributed to the stability both in the exchange rate and also in prices.
“We just need to maintain that stance and hope that this year, if we have a normal agriculture season, it is going to lessen the pressure on public spending, which is critical for fiscal policy and macroeconomic sustainability,” he said.
In its 2025 economic outlook report, FBC Securities said stability in monetary policies is providing a buffer against inflation, and resilient sectors like tourism, construction and mining are leading recovery efforts.
“Strong wheat harvest of 600 000 tonnes is supporting food security and exports, and increased adoption of digital and mobile platforms will enhance efficiency in financial transactions,” it said.
FBC noted that inflationary pressures are overally easing after the ZIG’s introduction but remain persistent in some sectors.
Episodes of exchange rate volatility, it also said, affect business confidence and planning.
The Confederation of Zimbabwe Industries is confident the country can sustain the prevailing exchange rate and inflation stability provided the authorities maintain a tight grip on liquidity growth.
In the outlook period, the Treasury expects the exchange rate to remain stable following the MPC pronouncements of September 27, 2024, which have already addressed most of
the emerging exchange rate
pressures.
The MPC increased the bank policy rate from 20 percent to 35 percent to help anchor inflation expectations and reduce inflationary pressures.
