Industry Warns of Impending Hardship as ZWG Annual Inflation Reaches 85%
The Confederation of Zimbabwe Industries (CZI) indicates that the present ZWG inflation trends do not align with market intervention efforts, suggesting challenging times ahead if effective countermeasures are not implemented promptly.
The industry lobbying organization has similarly attributed the decline in value of the ZWG currency, due to decisions made by regulators, as the catalyst for the significant annual inflation of the local currency.
In April 2024, the Reserve Bank of Zimbabwe (RBZ) introduced the ZWG currency with the aim of providing a lasting resolution to the nation’s long-standing monetary issues. At its launch, RBZ Governor Dr John Mushayavanhu characterized the ZWG as being supported by both mineral resources and foreign exchange reserves.
Approximately five months later, the ZWG faced significant losses compared to the US$ in both the informal and official markets, leading the central bank to mandate an abrupt 43% depreciation during the night.
In their most recent inflation tracker, CZI criticized the ZWG yearly inflation rate of 85.7% for April 2025, attributing this increase to the RBZ's devaluation policy.
"The sharp rise in ZWG inflation primarily stems from accumulated shocks that pushed month-to-month inflation throughout 2024. One major contributor was the depreciation of the exchange rate in September 2024, leading to a substantial increase in the ZiG Consumer Price Index (CPI). This subsequently raised annual inflation rates above what they were in April 2024," stated the industry association.
The high ZiG annual inflation, CZI said, poses challenges for businesses, particularly due to its impact on interest rates. To achieve a positive real interest rate, lending rates would need to be set around 85%, making borrowing difficult for businesses.
"In contrast, when interest rates fall below the inflation rate, this might lead to an increase in speculative borrowing. Thus, successful monetary policy must strike a careful balance to counteract these negative impacts," stated Industry.
The consortium stated that consequently, from April 17, 2025, the parallel market premium began to exhibit an increasing pattern due to the depreciation of the ZWG in the informal exchange sector, even though it remained steady in the formal marketplace.
By comparing the period 01 to 29 March 2025 with 01 to 29 April 2025, CZI contends data shows that the premium has slightly increased from an average of 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 realise a higher value from buying gold coins at a time when gold prices are increasing.
"Thus, the expectation was that the parallel market premium would actually shrink rather than increase," the industry added.
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