Is Zimbabwe’s economy finally turning a corner? Experts weigh in

After years of runaway inflation and monetary instability, Zimbabwe is showing signs of macroeconomic recovery. The question now is whether the momentum can be sustained.

Few economies have become as synonymous with inflation as Zimbabwe. Yet, over the past year, the country’s economic story has taken an unexpected turn.

Annual inflation, which stood at 90% this time last year, reaching a high of 95.8% in July 2024, has fallen sharply to 4.7%, data from Trading Economics shows. Today, it sits at a respectable 4.7%. This rapid decline marks one of the country’s strongest periods of price stability in years and comes despite continued global economic uncertainty and a fuel crisis.

The Reserve Bank of Zimbabwe has responded by lowering its interest rate by 500 basis points to 30%, its first reduction since 2024, signaling confidence that inflationary pressures are easing. The decision, Bloomberg reported two weeks ago, makes Zimbabwe’s central bank the first in the world to cut interest rates after the United States (U.S.) and Iran reached an interim peace deal to reopen the Strait of Hormuz.

Much of that progress in monetary stability has been attributed to the 2024 launch of its new currency, Zimbabwe Gold (ZiG), which has reduced dependence on the U.S. dollar.

“The inauguration of the ZiG came with very tight monetary policy, with strict controls in the growth of reserve money and broad money,” says Ashok Chakravarti, Senior Economic Advisor to the United Nations Development Program.

Coupled with the central bank’s clampdown on money flows are measures to contain liquidity while encouraging greater domestic value addition. Zimbabwe has banned the export of unprocessed lithium unless mining companies commit to local beneficiation, Chakravarti confirms. This is one example of efforts introduced to expand investment in refineries and retain more value in the economy.

Agriculture has become another growing revenue stream. Following 2024’s drought, so intense that it triggered a national state of disaster, output has increased. Chakravarti points out Zimbabwe is now self-sufficient in soft wheat production, “a major boost to all agro-based industries”.

The latest events have been beneficial to the farming and mining economy, but economists caution that more is required. Werner Jansen, Economist at Oxford Economics Africa, reminds FORBES AFRICA that despite the interest-rate cut, “the still elevated policy rate discourages borrowing in the domestic currency…Weak trust means few people use it as a store of value.”

Zimbabwe’s interest rates are still among the highest in the region.

And on the ground, confidence in ZiG is limited. The U.S. dollar remains the most popular currency, with ZiG accounting for some 17% of cash in circulation, according to the International Monetary Fund.

In the mining sector, rising gold prices have boosted export earnings, however, much of the growth has come from artisanal miners. Jansen says: “Large miners still face structural challenges such as power shortages and a lack of infrastructure.”

It underscores the reality: macroeconomic stability alone will not unlock long-term growth. Sustained investment–in energy, transport and industrial capacity–is just as important to Zimbabwe’s recovery.

There are reasons for optimism. “Depending on the trajectory of inflation, interest rates are likely to be lowered further during the course of the year,” Chakravarti predicts.