Wenslus Murape
Nelson Gahadza
Senior Business Reporter
THE Zimbabwe gold (ZiG) inflation is expected toremain stable, with average month-on-month inflation forecast to stay below 3 percent onthe back of tight fiscal and monetary policies.
Presenting the 2025 National Budget Statement yesterday, Finance, Economic Development, and Investment Promotion Minister Professor Mthuli Ncube said the 2025 fiscal plan was built on the foundation of single-digit inflation and a stable exchange rate, creating a favourablebusiness environment.
“Any deviation from these assumptions, including the widening of the premiumbetween the official and parallel markets, will severely impact macroeconomic stability,” he said.
Minister Ncube noted that prices for goods and services had relatively been stable following the introduction of Zimbabwe Gold (ZiG) in April 2024, andmonth-on-month ZiG inflation declined by -2,4 percent in May 2024 and averaged 0 percent in the second quarter of the year.
“However, inflation pressures emerged in August to October 2024,attributable to a surge in parallel market foreign exchange activities, whichworsened adverse inflation expectations,” he said.
Consequently, the Monetary Policy Committee (MPC) implemented stabilisationmeasures that included increasing the bank policy rate and standardising statutory reserve requirements for deposits.
The MPC also allowed greater exchange rate flexibility and reduced the limiton foreign exchange individuals can take out of the country.
The local currency depreciated to US$1: ZiG25 while the amount that can betaken out of the country was reduced from US$10 000 to US$2 000.
“The monetary policy measures have begun to have a positive impact, as boththe official and parallel exchange rates have stabilised,” said Minister Ncube.
The Treasury chief said the exchange rate was expected to remain stablefollowing the MPC measures, which have already addressed most of the emerging exchange rate pressures.
“In the short to medium term, the Government and the Reserve Bank ofZimbabwe (RBZ) will continue to respond to emerging pressures in order toentrench macro-economic stability,” he said.
He added that to consolidate exchange rate stability, the monetary authorities will entrench the efficiency of the willing buyer, willing seller foreign exchange rate system to enhance price discovery and use its monetary tools to anchor price stability.
Minister Ncube noted that the Government will deploy complementary fiscaland monetary policy tools to ensure the stability and acceptance of ZiG in theeconomy.
“Both fiscal and monetary authorities will continue to monitor marketliquidity conditions through the Liquidity Management Committee,” he said.
On the fiscal front, Minister Ncube said the Government will ensure thealignment of expenditure outlays to available resources while prioritising development and social expenditures.
“To this end, a comprehensive debt restructuring plan is being renegotiated with creditors.
This will be complemented by additional domestic resourcemobilisation initiatives, including the sale of assets, in order tore-establish fiscal sustainability,” he said.
He noted that the fiscal policy thrust of the 2025 National Budget is informed by the overall policy objective of restoring macroeconomic stability,critical for economic development and the achievement of Vision 2030 and the Sustainable Development Goals (SDGs).
Minister Ncube said during the last quarter of the year, priority will begiven to support social protection programs, which are still lagging interms of their budget utilisation.
However, he said this will be done in such a manner that does notdestabilise the economy.In addition, he said the Treasury will carefully manage payments durin November and December 2024 to avoid huge liquidity injections in themarket, which could trigger inflationary and exchange rate pressures.
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