Audrey Galawu and Nyashadzashe Ndoro

Zimbabwe’s monetary stability is improving, but the country has yet to build enough confidence in the Zimbabwe Gold to justify an immediate move to exclusive local-currency settlement, a new analytical paper has warned.

The assessment by researcher Sifiso Chikandi says falling inflation, exchange-rate stability and tighter monetary policy represent genuine progress, but warns that inadequate foreign-exchange reserves remain the clearest weakness in Zimbabwe’s attempt to rebuild trust in its currency.

“Immediate exclusive ZiG settlement is not warranted on the authorities’ own conditional framework because at least one necessary condition—reserve adequacy—remains unmet,” the paper, Zimbabwe’s Monetary Reckoning: Inflation, Dollarization, and the Institutional Conditions for Monetary Trust, says.

The conclusion comes as the Reserve Bank of Zimbabwe reports that annual ZiG inflation has remained below 5% for seven consecutive months, falling to 3.2% in July 2026.

FinTech and data governance expert Jabulani Simplisio Chibaya, however, cautions against treating the latest inflation figure as proof that price pressures have been permanently defeated.

“The headline achievement — inflation sustained below 5% for seven months — is genuine and hard-won after the ZiG's chaotic 2024 birth,” Chibaya said.

“But the data inside the statement tells a more fragile story than the cover page.”

He noted that inflation rose from 4.1% in January to 4.8% in April before easing, with the July decline partly reflecting a favourable base effect.

"Single-digit inflation in Zimbabwe today is a managed outcome, dependent on fuel prices, exchange rate discipline, and reserve accumulation all holding together simultaneously,” he said.

That caution is important because the latest gains are being tested against a deeper problem: whether Zimbabweans are prepared to hold wealth in the local currency.

Dollarisation remains deeply entrenched

The RBZ says ZiG accounted for about 40% of National Payment System transactions during the second quarter.

However, Chikandi’s analysis notes that IMF staff reported that about two-thirds of NPS transactions by value were conducted in US dollars in May.

The measures are not directly comparable because they use different specifications and coverage, but the paper concludes that both point to substantial, rather than dominant, use of the ZiG.

Foreign currency deposits provide an even stronger indication of continued dollarisation.

The paper notes that IMF staff described the share of foreign-currency deposits as “high and increasing”, with the latest exact figure available to the study standing at 82.5% in July 2025.

This means that even as ZiG use in transactions has increased, Zimbabweans continue to hold much of their financial wealth in foreign currency.

Chibaya points to a similar gap between the existence of digital payment infrastructure and its actual use.

Electronic transactions now account for more than 40% of transactions, but POS machine usage has stagnated at just 36% of deployments.

For businesses and households, the implication is straightforward: the formal financial system may be improving, but confidence and participation have not moved at the same pace.

Reserves remain the biggest test

Zimbabwe received US$10.72 billion in foreign currency during the first six months of 2026, up 47.8% from US$7.25 billion during the same period last year.

Official reserves stood at US$1.6 billion at the end of June, equivalent to 1.6 months of imports, according to Chikandi’s analysis.

By the end of July, the RBZ reported reserves had increased further to US$1.7 billion, although import cover remained only 1.7 months.

That is still well below the authorities’ stated requirement of three to six months of import cover.

“The official threshold is not met,” Chikandi’s paper says.

The distinction matters because strong foreign-currency receipts do not automatically translate into adequate reserves.

The research calls for greater transparency on how foreign-currency receipts are distributed between surrender requirements, retention, imports, debt service, intervention and private foreign-asset accumulation.

For Chikandi, reserve adequacy is not simply another economic statistic. It is central to whether the RBZ can credibly defend the currency during a shock.

Stability is welcome, but credit remains expensive

CZI President Mrs Clara Mlambo has welcomed the RBZ’s disciplined monetary policy approach and its quarterly engagement with the private sector.

She said “stability is the greatest incentive government can give to business.”

CZI Chief Economist Dr Cornelius Dube, however, warned that monetary stability remains vulnerable to forces outside the central bank.

“Productivity, exports, external shocks and policy disruptions continue to leave monetary policy vulnerable,” Dube said.

The RBZ has cut the Bank Policy Rate from 35% to 30% and reduced the Targeted Finance Facility rate from 20% to 15%.

The TFF has a ZiG1.2 billion limit, with banks allowed to lend to productive sectors at a maximum all-in rate of 25%.

But the central bank itself acknowledges that businesses are not necessarily experiencing the full benefit of lower policy rates.

“Currently, the gap between the Bank Policy Rate and average lending rates has become very wide, pricing productive sectors out of formal credit,” the RBZ said.

Chibaya argues that the gap reveals a deeper problem with administratively determined interest rates.

“When the central bank both creates the currency and sets its price of credit, capital allocation stops being a market signal and becomes a policy instrument,” he said.

He also cautions that directed lending can create misallocation if credit is channelled towards projects that would not meet genuine market-based investment thresholds.

For women running small businesses, the consequences are practical.

Expensive credit can prevent a trader from replacing stock, buying equipment or expanding. Those unable to access formal finance may turn to informal lenders.

Chibaya said the warning over unlicensed lenders was significant because it suggests that some Zimbabweans unable to access formal credit are turning to “informal and predatory lenders”.

The ZiG’s credibility problem

Chikandi argues that Zimbabwe’s monetary difficulties are rooted in more than the design of its currency.

The country’s 2007–2008 hyperinflationary collapse was driven by a combination of fiscal dominance, quasi-fiscal activity, declining production, foreign-exchange shortages and a loss of public confidence in domestic money.

The experience has created what the paper describes as a deep monetary memory.

Businesses continue to use dual-currency accounting, savers favour foreign currency for longer-term holdings and creditors factor exchange-rate and convertibility risks into their decisions.

The ZiG, introduced in April 2024 with a reserve-backed framework involving foreign currency and precious metals, can strengthen confidence, the paper argues, but only if its backing is independently verifiable, liquid and unencumbered.

That credibility becomes even more important as Zimbabwe considers a transition towards exclusive local-currency settlement.

No fixed date for mono-currency

The RBZ says the move towards mono-currency will be market-driven rather than tied to a fixed date.

The transition conditions include durable single-digit inflation, reserves equivalent to three to six months of imports, efficient foreign-exchange management, exchange-rate stability, stronger demand for ZiG, financial-sector stability, secure payment systems and fiscal-monetary cohesion.

The RBZ’s own assessment puts progress towards these conditions at 50.1%.

It stresses that this “does not signal immediate transition to mono-currency.”

Chikandi’s research reaches a similar conclusion, identifying reserve adequacy as the clearest unmet condition.

The paper warns particularly against forced conversion of existing foreign-currency assets, arguing that such measures could damage property rights and undermine monetary credibility.

Instead, it recommends that authorities first deepen local-currency savings and funding markets, improve foreign-exchange price discovery and publish clear measurable thresholds for each transition condition.

What stability means for ordinary Zimbabweans

For households and businesses, monetary stability is ultimately judged outside the RBZ’s balance sheet.

It is measured through food prices, school fees, transport costs, access to credit, business turnover and whether money earned today will retain its value tomorrow.

Lower inflation protects purchasing power, but Chikandi warns that it does not automatically reverse losses suffered during previous periods of high inflation.

The paper therefore calls for policymakers to monitor real wages, pensions, food and transport prices and social spending alongside headline inflation.

It also recommends protecting foreign-currency accounts and pension holdings while developing ZiG savings products capable of delivering positive real returns.

For businesses, it recommends currency-matched cash-flow forecasts, objective indexation and conversion clauses, and contingency plans that account for settlement times rather than simply quoted exchange rates.

The RBZ has made real progress.

Inflation is lower. The exchange rate is more stable. Reserves have increased. Monetary policy is becoming more predictable and foreign-currency inflows have strengthened.

But the evidence also shows that Zimbabweans have not yet abandoned the US dollar as their preferred store of value.

That is why the question is no longer simply whether Zimbabwe has achieved monetary stability.

It is whether that stability is strong enough, transparent enough and durable enough to persuade people to trust the currency with their savings, businesses and future.

As Chikandi’s paper puts it:

“Stabilisation is real. Monetary confidence is unfinished.”