Talkmore Gandiwa
HARARE (FinX) – Zimbabwe’s broad money position recorded a marginal increase in September 2025, rising by 0.32% to ZiG 99.5 million, a gain of just ZiG 321.46 million from the August level of ZiG 99.2 million. While the growth appears minimal, Economic analysts say the movement provides important insight into the country’s evolving liquidity environment and the ongoing push to maintain price stability in a fragile economic climate.
The slight rise in M3 was primarily driven by an increase in foreign currency deposits, which expanded by 0.67% to ZiG8 2.5 million from ZiG81.9 million in the previous month. This growth amounted to ZiG552.60 million and once again highlighted the dominance of foreign currency balances in Zimbabwe’s financial system.
According to the Zimbabwe Statistics Agency, 80% of the local transactions are being conducted in foreign currency predominantly the US dollar. However according to the central bank, foreign currency now accounts for an overwhelming 82.91% of total money supply, underscoring the persistent dollarisation tendencies that continue to shape market confidence and restrict the full uptake of the Zimbabwe Gold (ZiG) currency.
“This heavy skew towards foreign currency signals both an anchor and a risk: while it cushions inflation expectations when managed tightly, any rapid rise in foreign currency liquidity especially within informal markets could easily fuel spending pressures that destabilise prices,” said Economic analyst Eddie Cross.
In sharp contrast, the local currency component of broad money continued to contract, falling by 1.34% from ZiG17.2 million in August to ZiG17 million in September. This decline reflects the authorities’ deliberate strategy to maintain strict liquidity control after years in which speculative borrowing and excess local currency creation contributed to sharp inflation spikes.
By maintaining a tight stance on the ZiG, the central bank aims to curb arbitrage behaviour, ease pressure on the exchange rate and reduce the quick pass-through effect that typically transmits currency volatility into price increases.
According to the latest broad money report by the central bank, local currency deposits contributed only 15.39% to total M3, with negotiable certificates of deposit at 1.57% and physical cash in circulation at just 0.12%. The structure highlights Zimbabwe’s hybrid monetary system—one in which foreign currency dominates transactional use and savings, while the local unit remains tightly regulated to preserve stability.
Credit dynamics for the month also painted a mixed but generally positive picture. Net credit to Government fell by 4.66% to ZiG68.9 million, reflecting reduced reliance on long-term treasury bills as a borrowing instrument.
“This is an constructive development that supports the Reserve Bank’s commitment to limiting monetised deficits that historically fed into inflation,” Cross added. “Reduced government borrowing from the banking sector also creates room for banks to expand credit to productive areas of the economy.”
Credit to the private sector rose by 1.65% to ZiG66.4 million, up from ZiG65.3 million in August. The growth was largely powered by a 2.37% increase in foreign currency-denominated loans, which increased to ZiG56.2 million. Cross said this trend reflects both the private sector’s continued preference for stable currency borrowing and the broader trust in foreign currency-backed assets as a hedge against volatility.
70% of private sector credit flowed to households, agriculture, manufacturing and distribution key sectors that drive food production, industrial output and domestic consumption. The mining industry, a major foreign currency contributor, received about 8.96% of outstanding credit, consistent with its central role in export performance and foreign earnings.
The overall 0.32% growth in broad money falls within a range describe as supportive of short-term price stability. Zimbabwe’s month-on-month inflation has historically reacted sharply to sudden jumps in liquidity, making the relatively subdued expansion in M3 a positive signal.
The increase in foreign currency deposits, “though modest, provides a buffer against exchange rate volatility, while the reduction in local currency liquidity lowers speculative tendencies and restricts the rapid circulation of excess funds that typically drive price increases.” Said Cross. At the same time, increased lending to productive sectors helps boost supply capacity, which is essential in containing cost-push inflation pressures that have troubled the economy.
Cross highlighted that while the September data suggests improving stability, the balance remains fragile. “The overwhelming reliance on foreign currency in both deposits and lending continues to expose the economy to external shocks, global market fluctuations and confidence swings. Any instability in foreign currency inflows or disruptions in key export sectors could quickly affect liquidity levels and, consequently, inflation.”
Nevertheless, the combination of modest money supply growth, tight local currency management and increased productive-sector credit points toward an encouraging monetary environment. Cross said the coming months will be critical in determining whether this delicate equilibrium can be sustained.
“RBZ will need to remain vigilant, ensuring that liquidity growth continues to align with real economic activity rather than speculative demand.” He said. For now, Zimbabwe appears to be navigating a cautious but stabilising path one that reflects both progress and the persistent risks beneath the surface.
