As global volatility continues to cast a long shadow over domestic markets, the Confederation of Zimbabwe Industries (CZI) has issued a stern advisory to the nation’s financial authorities.
Despite a marginal easing in the astronomical fuel prices that have plagued the country in recent weeks, the industrial body is urging extreme caution, specifically warning that any premature loosening of monetary policy could undo the fragile progress made toward price and exchange rate stability.
The current economic climate is being heavily dictated by external shocks, primarily the conflict involving the United States, Israel, and Iran that ignited in February.
This geopolitical instability has placed Zimbabwe’s inflation rate under renewed and intensifying pressure.
Data from the previous month indicates that the annual inflation rates for both the Zimbabwe Gold (ZiG) currency and the United States dollar reached 4.4% and 1.3%, respectively.
These figures represented a significant climb of 0.6 and 0.4 percentage points from the levels recorded in February, signaling a troubling upward trend.
The primary engine for this inflationary surge has been the volatility of the energy market.
The Middle Eastern conflict directly triggered two successive fuel price hikes, pushing the cost of diesel and petrol from initial levels of US1.71 per litre up to peaks of US$2.23 per litre.
While the latest market adjustment saw a slight reprieve, with prices retreating to US$2.08 for petrol, the CZI emphasises that these costs remain dangerously elevated.
The International Monetary Fund (IMF) has since adjusted its outlook, projecting that Zimbabwe’s inflation rate will likely conclude the year at 8%.
This forecast was heavily influenced by the sustained impact of fuel price increases on the broader supply chain.
The IMF anticipates a cooling of Zimbabwe’s economy with growth expected to slow by 2.5 percentage points to 5% this year, with a further dip to 4.2% in 2027 should current geopolitical tensions persist.
The Reserve Bank of Zimbabwe (RBZ) is also on high alert.
“The Reserve Bank of Zimbabwe Monetary Policy Committee noted that recent domestic fuel price hikes are poised to trigger second-round effects by de-anchoring inflation expectations,” the CZI said in its latest inflation and currency update.
This “de-anchoring” is already visible in the data; month-on-month ZiG inflation accelerated to 0.5% in March 2026, a sharp rise from the 0.1% seen just a month prior.
In light of these pressures, the CZI has advocated for a steadfast approach to fiscal management.
“Therefore, maintaining the current tight monetary policy is essential for the central bank to ensure that price and exchange rate stability are not compromised,” the update added.
The CZI called for government intervention to alleviate the burden on the private sector.
“In addition, it is also imperative that the government evaluates current fuel taxes and levies to provide necessary fiscal relief to the business community,” it said.
The CZI cautioned that the full extent of the March price shocks has not yet been fully captured in official statistics.
Because inflation data is generally collected between the 16th and 18th of each month, the March figures only reflect the first of the two major fuel adjustments.
“This means that the impact in price movements in March due to fuel price adjustments reflect only the effect of the first fuel price adjustment, and not the second adjustment that was made on the 18th of March 2026,” the CZI said.
Consequently, the outlook for the current month is increasingly grim.
“It is expected that the April inflation statistics will reflect the effect of the second adjustment, as well as any other adjustment that can be made before the data collection period.
“Thus, it is expected that year-on-year inflation for April 2026 would show an upward trend to be at least 5%-8%,” the CZI warned.
While policymakers struggle to anchor expectations, the reality on the ground for Zimbabwean households is one of increasing hardship.
Research from IH Securities suggests that US dollar inflation is steadily eroding real incomes across the country.
“While some businesses absorb costs to stabilise pricing, currency risk, taxation and government levies are increasingly passed through to consumers, further straining household budgets,” IH Securities observed.
While the firm acknowledged that a commitment to stability has helped rein in runaway inflation, it highlighted the unique challenges of the current landscape.
“However, constrained local currency liquidity, creates a complex and dynamic cash-driven market that requires careful navigation from investors,” IH Securities wrote.
In a direct response to these liquidity constraints, the central bank has begun introducing new ZiG notes of higher denominations.
While intended to ease the flow of the local currency, there are lingering fears that this move could become inflationary.
The demand for local currency remains high, yet the market continues to be “starved” of liquidity due to the RBZ’s hawkish stance and tight fiscal policies.
As Zimbabwe navigates this economic tightrope, the balance between curbing inflation and providing enough liquidity for growth remains the defining challenge of 2026.