FOR ordinary Zimbabweans, inflation has never been just an economic statistic. At the height of the country’s worst hyperinflation episode in 2008, it was a daily threat.
Prices changed between morning and evening, wages lost value before payday, and savings evaporated.
The last official inflation figure released by the Reserve Bank of Zimbabwe (RBZ) for July 2008 stood at 231 million percent year-on-year.
Alternative estimates later suggested that by November 2008, prices were rising at an astronomical 79,6 billion percent per month.
That trauma explains why the latest numbers matter.
According to the RBZ’s Quarterly Snapshot on Monetary, Currency, Price and Financial Developments (as of 31 December 2025), annual inflation in the local currency, Zimbabwe Gold (ZiG), fell to 15 percent by December 2025, with month-on-month inflation averaging 0,4 percent throughout the year.
By January 2026, the Treasury reported that ZiG inflation had slowed further to about 4,1 percent year-on-year, while US-dollar inflation stood at roughly 1 percent.
For a country that experienced volatility, this is no trivial achievement. However, the real question remains: Can this stability last?
The mechanics behind the numbers
The RBZ attributes this moderation to tight monetary discipline.
The central bank’s policy rate remained at 35 percent, while the minimum time deposit rate was set at 7,5 percent for ZiG and 4 percent for US dollars.
Minimum savings deposit rates were 5 percent for ZiG and 2,5 percent for US dollars.
The bank’s intention has been to maintain positive real interest rates and anchor economic expectations.
More critically, the RBZ reports that ZiG reserve money growth was kept in check, with total ZiG deposits reaching ZiG31,9 billion by year-end.
In a significant break from past practice, the bank stated that lending to the Government was nil, reflecting a commitment to avoid monetising fiscal deficits, historically one of Zimbabwe’s biggest inflation triggers.
A separate RBZ update emphasised that “ZiG money supply is under check due to zero borrowing from Government”.
During previous inflationary cycles, central bank financing of deficits fuelled rapid money supply growth and price instability.
This current approach marks a clear departure from the past.
Exchange-rate stability: The missing link restored?
Inflation in Zimbabwe has historically been tightly linked to exchange-rate instability.
The RBZ reports that throughout 2025, the interbank exchange rate averaged ZiG26 per US dollar, while the parallel market premium narrowed sharply from highs of over 140 percent before April 2024 to an average of around 20 percent in 2025.
The black market rate reportedly declined from around ZiG40/US$1 to an average of ZiG31/US$1.
This convergence reduces arbitrage opportunities and dampens the speculative pricing behaviour that previously filtered quickly onto shop shelves.
For consumers, this translates into predictability. When exchange rates stabilise, pricing becomes less erratic.
At Mbare Musika, vegetable trader Ms Miriam Dube says the difference is noticeable.
“Last year I had to change my prices almost every week because suppliers kept adjusting. Now I can keep the same price for longer. Customers complain less, and I can plan my stock better,” she said. “It’s not perfect, but at least it’s calmer.”
Economist Mr Persistence Gwanyanya says this behavioural shift is critical.
“As confidence in ZiG improves, the reflex to dispose of it at every opportunity is waning,” he said. “The currency is increasingly accepted both as a means of transaction and as a store of value.”
The RBZ says ZiG transactions now account for roughly 30 to 40 percent of total national payment system usage, with local currency circulation standing at about 3 percent of total bank deposits.
Foreign reserves: Credibility or cushion?
Perhaps the most important pillar of this new stability are reserves.
The RBZ reports that foreign currency reserves reached US$1,2 billion by December 2025, equivalent to roughly 1,5 months of import cover. Total foreign currency receipts in 2025 amounted to US$16,2 billion, up from US$13,3 billion in 2024.
This increase has strengthened the country’s ability to build reserves without resorting to monetary expansion.
The bank states that ZiG is backed by foreign reserves, some of which are gold-based, with foreign currency reserves covering reserve money approximately 5,88 times.
In a country where currency collapses have been frequent, reserve backing is intended to bolster credibility and provide the capacity to intervene when necessary.
The uncomfortable adjustment
Stability, however, has side effects. As volatility fades, so do the informal profit channels built around it.
Money changers, arbitrage traders and firms that thrived on rapid repricing are seeing their margins squeezed.
The RBZ itself acknowledges that some recent growth was “volatility-driven.”
“As expected, easing inflation is being accompanied by a slowdown in certain economic activities,” Mr Gwanyanya said.
“Part of the recent growth was volatility-driven and as stability takes hold, that channel is naturally fading.”
Low inflation removes survival tactics such as speculative stockpiling and panic buying. Businesses must now compete on efficiency, cost control and product quality.
Consumers are also noticing another adjustment: smaller package sizes at unchanged prices, often labelled “shrinkflation.”
Mr Gwanyanya prefers the term “right-sizing.”
However, not everyone is convinced the battle is won.
A local economist, who preferred to remain anonymous, warned that one month’s single-digit reading does not prove durability.
“It’s too early to draw any meaningful inferences from a single month’s inflation reading, especially after more than three decades characterised by double, triple and even quadruple-digit price growth,” the economist said.
“What matters is sustained, broad-based moderation over time, supported by consistent monetary and fiscal discipline, not a temporary statistical reprieve.”
Economic analyst and former Zimbabwe National Chamber of Commerce president Mr Trust Chikohora said: “There is a lot of work to be done to ensure sustainability. We need to get back to basics, and that means living within our means.
“Interest rates need to be in line with the levels of inflation so that borrowing costs are not pushed onto the prices of goods and services.”
What ordinary Zimbabweans should watch
For households, the benefits of low inflation are already tangible. Slower and more predictable price movements mean the cost of basics such as bread, mealie-meal and cooking oil no longer shifts abruptly from week to week.
Salaries and pensions retain their purchasing power for longer, allowing families to plan beyond the next payday.
This psychological shift, from urgency to cautious planning, may be one of the most significant changes occurring beneath the surface of the data.
The real test is whether this discipline holds.
Continued restraint in money supply growth, the maintenance of zero central bank financing of Government deficits and exchange-rate stability will be critical.
Equally important is the steady accumulation of foreign currency reserves beyond the current 1,5 months of import cover to provide a buffer against external shocks.
Zimbabwe’s history shows that inflation psychology can shift quickly if policy discipline weakens.
In his 2008 book Zimbabwe’s Casino Economy, former RBZ governor Dr Gideon Gono warned of a “casino ethic” where speculative behaviour overwhelmed productive activity.
Finance Minister Professor Mthuli Ncube has similarly cautioned against destabilising speculation.
The difference now will be whether discipline replaces reflex, whether stability becomes a habit rather than an exception.
The RBZ maintains it will continue to pursue “prudent money supply management and strong fiscal and monetary policy complementarity” into 2026. For a country scarred by hyperinflation, single-digit inflation is a test of credibility, discipline and endurance. – Herald
