Staff Writer 
ZIMBABWE’s inflation is expected to remain elevated in 2025 driven by foreign currency exchange rate pressures on the domestic currency — the ZiG, financial analysts, Fincent Securities have said.
ZiG month-on-month inflation recorded a drastic drop in the final quarter of 2024 tumbling from 37,2 percent in October to 11,71 percent in November and further to 3,67 percent in December 2024.
Authorities attributed the downward trend to the success of fiscal and monetary interventions, boosting confidence in the ZWG. However, critics say exchange rate pressures remain a constant feature posing serious inflationary risks as reflected by a wide mismatch between the official and parallel market exchange rate of around 40 percent.
“Inflation and currency volatility continues, with the ZiG under severe pressure due to low confidence and a widening gap between official and parallel market rates.
“Exchange rate pressures further weaken currency management, with the parallel market premium projected to exceed 50 percent in 2025,” Fincent Securities said in its 2025 outlook report.
“Although fiscal and monetary authorities anticipate ZiG inflation to remain stable, with month-on-month rates averaging below three percent, supported by tight fiscal and monetary policies, and USD inflation expected to average five percent, signaling improved economic stability, we hold a different view,”
“We believe both ZiG and USD inflation will remain elevated due to exchange rate pressures. Businesses are likely to adjust prices to align with parallel market rates, while retailers, aiming to protect margins, may increase USD prices to maintain parity with the implied official exchange rate.”
Most formal retailers have already adjusted their prices, tracking parallel market rates resulting in uncompetitive pricing. Regrettably, this continues to threaten formal retailers’ businesses compared to their less regulated informal competitors.
Year-on-year USD inflation shifted from deflationary territory at -2,9 percent in January 2024 to 2,48 percent by December.
“Policymakers interpret this progression as a normalization of price levels and an end to deflationary pressures. Yet, this perspective overlooks the realities of businesses increasing USD prices to keep pace with the parallel market rate, effectively eroding consumer purchasing power and amplifying cost pressures,” Fincent Securities said.
This comes as economists, globally, are also predicting inflation to remain high. A quarterly study conducted by the German Ifo Institute and the Institute for Swiss Economic Policy consisting of almost 1 400 experts from 125 countries forecasted that average global inflation rate will average of 3,5 percent in the next three years, only slightly below the 3,9 percent anticipated for 2025.
For Zimbabwe, which relies on imported merchandise for its economy to tick, the effects of global inflation will be significant.
