THE Zimbabwe Gold (ZiG) annual inflation rate dipped 50 percentage points to 32,7% in October — the biggest drop since the country began calculating annual inflation figures in local currency.
This means that prices, as measured by the all-items ZiG consumer price index, increased by an average of 32,7% from October 2024 to October 2025, according to statistical agency, ZimStat.
Annual inflation has been on a downward trajectory due to tight fiscal and monetary policies as authorities move to contain inflation and achieve exchange rate stability, building blocks towards a mono-currency regime by 2030.
Reserve Bank of Zimbabwe governor John Mushayavanhu's back-to-basics thrust has seen the central bank keeping an eagle eye on money supply growth to contain inflation.
The central bank has instituted a raft of measures to ensure price and exchange rate stability, which entail increasing the bank policy rate to 35% from 20% following a sharp depreciation of the local currency in September last year.
The central bank's Monetary Policy Committee also increased and standardised the statutory reserve requirements for demand and call deposits for both local and foreign currency deposits to 30%, from 15% and 20%, respectively.
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It also increased the statutory reserve requirements for savings and time deposits for both local and foreign currency to 15% from 5%.
There has been concern that the current statutory reserve requirements are throttling banks thereby stifling credit growth in the economy.
Yet monetary authorities insist the ratios are in sync with what is happening in other economies and have introduced a targeted finance facility to support the productive sectors.
Central bank statistics show that total disbursements under the facility stood at ZiG420 million at the end of June, while the outstanding balance was ZiG350,4 million.
Manufacturing and agricultural sectors dominated disbursements, accounting for 44,82% and 34,73%, respectively.
The dip in annual inflation has increased prospects of a review in the bank policy rate, which at 35%, has choked lending, especially in local currency. This has seen foreign currency-denominated loans accounting for 88,4% of the banking sector aggregate loans as at June 30, 2025.
It has been a tough year characterised by high interest rates and statutory reserves as the central bank ensured inflation is kept in check.
For the first time, inflation is below the bank policy rate, giving a positive interest rate of 3%.
The temptation is to reduce the bank policy rate now that inflation has fallen.
However, we urge the central bank to take a cautious approach to avoid igniting speculative borrowing fires that fuel inflation.
We have travelled that road before, where low interest rates fuelled borrowing for speculative purposes.
The exchange rate stability enjoyed over the past year is due to the "pains of adjustment", measures that have been instituted.
The premium on the United States dollar has fallen to 20% from as high as 100% on the parallel market, signalling that the tight monetary policy thrust is bearing fruit.
Fiscal and monetary authorities must not throw away the reins if they are serious about maintaining the current levels of stability. What they must focus on is to ensure this stability is visible in people’s pockets.
Zimbabweans have been traumatised by hyperinflation and would not want to go back to that era.
Monetary authorities must strike a balance between the need to maintain price and exchange rate stability, and economic growth.