RBZ Attributes ZiG Inflation Spike to Base Effect

The Reserve Bank of Zimbabwe (RBZ) has clarified that the recent spike in annual ZiG inflation is a statistical distortion caused by a base effect, and does not reflect current pricing trends or purchasing power in the economy.

Annual inflation climbed from 85.7% in April to 92.1% in May 2025, raising concerns about a return to price instability. However, the central bank attributed the increase to a one-off inflation shock in October 2024, following the transition from the Zimbabwe dollar (ZW$) to the Zimbabwe Gold (ZiG) currency.

The shift saw month-on-month inflation leap from 5.8% in September 2024 to 37.2% in October, creating a high reference point that is now distorting year-on-year comparisons.

By Ruvarashe Gora

“This increase in annual inflation is not reflective of current economic fundamentals,” said RBZ Governor Dr John Mushayavanhu. “It is largely a carry-over from last year’s currency switch and does not indicate deteriorating price stability or erosion of purchasing power.”

Dr Mushayavanhu, Governor of the Reserve Bank of Zimbabwe noted that monthly inflation has remained low below 1% for the past three months signalling underlying stability supported by tight monetary policy. He emphasised that monthly inflation is a more accurate gauge of current consumer prices and purchasing power.

Annual inflation data for ZiG only became available in April 2025 after a full year of price records in the new currency. The central bank said the elevated annual inflation figures are expected to persist until September 2025 before declining from October onwards.

RBZ projects that annual inflation will drop below 30% by December and trend toward single digits over the medium term.

The Bank urged consumers, businesses, and investors to focus on month-on-month inflation when making financial decisions, as it better reflects real-time economic conditions.

“Monetary policy will remain appropriately tight to preserve price stability and support continued economic growth”.

The RBZ reiterated its commitment to maintaining currency and price stability, positioning its inflation management framework as central to Zimbabwe’s ongoing economic recovery.