Industry warns of tough times ahead

The Confederation of Zimbabwe Industries (CZI) has bemoaned the “very high” annual inflation rate for April, which it says increases the cost of borrowing.

The Zimbabwe National Statistics Agency (Zimstat) said annual inflation for April was 85,7%.

The release of the ZiG annual inflation numbers is the first time since the introduction of the local currency in April last year.

Market analysts, economists and experts have disputed the double-digit inflation rate, with most saying it had entered triple-digit territory.

The Bretton Woods institutions have asked for raw data coming from ZimStat, as they too have raised concerns about how the agency is determining its inflation rates.

“The ZiG currency was officially launched on the 8th of April 2024, marking its first anniversary on the 8th of April 2025. It replaced the rapidly depreciating Zimbabwean dollar (ZWL), which was also characterised by high inflation,” CZI said in its new April 2025 Inflation and Currency Developments Update.

“However, in April 2025, the ZiG had an annual inflation of 85,7%, which is very high. The high ZiG inflation largely reflects cumulative shocks that drove month-on-month inflation in 2024.”

CZI said a significant factor was the September 2024 exchange rate devaluation, which increased the ZiG Consumer Price Index and, in turn, elevated annual inflation compared to April 2024 levels.

“The high ZiG annual inflation poses challenges for businesses, particularly due to its impact on interest rates. To achieve a positive real interest rate, lending rates would need to be set around 85%, making borrowing difficult for businesses,” CZI said.

“Conversely, interest rates below the inflation rate may encourage speculative borrowing. Effective monetary policy will require a delicate balance to mitigate these adverse effects.”

CZI was also concerned with the annual US dollar-based inflation rate.

“The USD year-on-year inflation for April declined to 14,4%, which was a 0,6 percentage points drop from a rate of 15% in March 2025,” CZI said.

“Double-digit inflation in a highly dollarised economy is a significant concern, as price stability is generally anticipated in USD terms. Thus, it is hoped that this high year-on-year inflation will also fall as the influence of ZiG inflation on the month-on-month inflation is taken away by the repeal of SI (Statutory Instrument) 81A of 2024.”

SI 81A of 2024 kept the pricing of goods and services in line with the exchange rate by criminalising any business that priced above the official exchange rate.

The legislation was repealed last month, allowing businesses to price their goods in line with market dynamics.

“The parallel market premium started showing an upward trend on the 17th of April 2025 as the ZiG depreciated on the parallel market, despite being stable on the official market,” CZI said.

Comparing the period 01 to 29 March 2025 with 1 to 29 April 2025 shows that the premium has slightly increased from an average of 25% to 28%, respectively. An increasing parallel market premium distorts price signals to both businesses and consumers.”

CZI said the recent announcement that gold coins were now available was expected to absorb any pressure on ZiG to depreciate, as holders of the local currency realise a higher value from buying gold coins when gold prices increase.

“Thus, the expectation was that the parallel market premium would shrink rather than increase,” CZI said.

Newsday