Zimbabwe lifts exchange rate controls

Zimbabwean businesses have been granted greater flexibility in pricing their goods and services, following the Government's decision to scrap exchange rate controls amid increased currency stability and efforts to harmonise formal and informal market operations.

Through Statutory Instrument 34 of 2025, Finance, Economic Development and Investment Promotion Minister Professor Mthuli Ncube officially repealed a regulation introduced in May 2024 that restricted businesses from using exchange rates higher than the Reserve Bank of Zimbabwe's (RBZ) official interbank rate. The move formally legalises what had already become a common practice in the market, where many retailers priced their products using alternative exchange rates.

This policy shift is expected to reduce pricing distortions and increase competitiveness, as market forces are now set to determine the applicable exchange rates in commercial transactions.

"The restriction has now been removed," said Professor Ashok Chakravarti, a member of the RBZ's Monetary Policy Committee. "Because of the stability of the local currency and the economy, the Government is confident that pricing in the market can be freed. It will stabilise based on competition amongst businesses."

He noted that many businesses had been informally applying exchange rates of between 30 and 32 Zimbabwe Gold (ZiG) per US dollar, significantly above the official rate of 27. With authorities turning a blind eye, this dual pricing system had already become entrenched. "All we have done is legalise that particular type of pricing and behaviour in the market," Prof Chakravarti added.

The Government's move comes in response to growing pressure from business associations and economic analysts, who argued that the restrictions were out of step with market realities and undermined formal sector competitiveness.

According to the Zimbabwe National Chamber of Commerce (ZNCC) chief executive Christopher Mugaga, the repeal is a welcome development. "This is Government trying its best to close the gap between the formal and informal players. The move gives businesses the leeway to deal with prices as they see fit and adjust according to the environment."

He, however, warned that exchange rate liberalisation must be matched by appropriate fiscal policies. "The fiscal side should complement the monetary side in order to level the ground, and this can be done by reducing taxes to the formalised and formalising the informal."

Statutory Instrument 34 of 2025, formally titled The Exchange Control (Amendment of Schedule to the Exchange Control Act) (Repeal) Notice, also repeals the schedule that enforced civil penalties for using unofficial exchange rates. In effect, the new law removes punitive measures that had largely been ignored in practice.

Economists have praised the policy shift as both realistic and long overdue. Dr Pedzisai Kaunda, an independent economist, said the new approach acknowledges the behaviour of a market already operating under de facto liberalisation.

"Businesses were already pricing goods at a rate they felt was viable. The Government's recognition of this, and more importantly, the decision to give it legal backing sends the right signal to investors and retailers alike," Dr Kaunda noted. He added that the change could help revive confidence in the formal retail sector, which had struggled to compete with the parallel market.

Research economist Mrs Gladys Shumbambiri-Mutsopotsi described the development as a "corrective policy shift" that suggests a growing maturity in economic governance.

"Through liberalising the pricing mechanism, the Government is acknowledging market behaviour and responding with policy that is more facilitative than punitive. It shows a learning curve in governance and a greater willingness to let economic fundamentals drive outcomes," she said.

Despite the optimism, both economists emphasised the importance of consistency and policy coordination. "Sustaining this momentum and supporting it with a credible fiscal framework is what will anchor business sentiment going forward," Mrs Shumbambiri-Mutsoptsi added.

The liberalisation comes at a time when the local currency, the ZiG, has enjoyed relative stability, bolstered by improved foreign currency inflows and tighter monetary controls. Government hopes this environment, coupled with exchange rate flexibility, will restore consumer trust, reduce inflationary pressures, and attract more investors to the formal economy.

As Prof Chakravarti summed it up, "Let it be determined by competition amongst the players. That is the right way to go."

With the burden of pricing regulation lifted, attention now shifts to whether this newfound freedom will help bring about greater economic stability and narrow the divide between Zimbabwe's formal and informal sectors.