Zimbabwe to Require Taxes and Fees in Zimbabwe Gold (ZiG)

The Zimbabwean Treasury is poised to implement new measures mandating that most taxes and fees be paid exclusively in Zimbabwe Gold (ZiG). This initiative aims to boost demand for the local currency and stabilize its value. The decision aligns with preparations for the 2025 National Budget, which is set to be presented next month.

On September 27, the ZiG experienced a notable decline, trading at US$1.39, down from US$1.99 the day prior. As of yesterday, the dollar was valued at ZiG26.67 in the interbank market. Since its introduction in April, backed by US$450 million in foreign reserves, the ZiG has faced significant volatility.

During discussions with development partners in Harare, Finance Minister Mthuli Ncube announced the government’s intention to require taxpayers to fulfill a substantial portion of their obligations in the local currency. “Customs duties are now payable in local currency. Moving forward, and in line with the de-dollarization roadmap, other taxes will also be required to be paid in local currency, including fees for government services,” he stated.

In his midterm fiscal policy review, the Minister proposed legislative amendments to permit companies to pay corporate income tax in both local and foreign currencies on a 50:50 basis. He added that companies generating more than 50% of their revenue in foreign currency should follow a similar accounting method for corporate income tax.

While some critics advocate for all government services, including passport fees, to accept only ZiG to bolster its usage, the government maintains that certain fees must still be collected in US dollars due to existing arrangements.

The Minister also discussed plans to restructure some debt terms and issue long-term securities to alleviate debt servicing costs. He underscored that fiscal expenditures would prioritize critical economic enablers while protecting essential social programs for vulnerable populations.

The minister attributed the rise in national public debt—currently estimated at US$21 billion—to the government’s assumption of legacy debts, the central bank’s external liabilities, capital investments in the Mutapa Investment Fund, and compensation for former farm owners. He assured that the Treasury would strive to maintain a sustainable budget deficit of less than 3% of GDP, ensuring expenditures align with available resources.

Despite these efforts, economists caution that the volatile nature of the ZiG may exacerbate budgetary challenges amid rising living costs in both local and foreign currencies. Ncube reaffirmed the government’s commitment to fiscal sustainability and currency stability, stating, “Our focus will be on supporting long-term fiscal sustainability while prioritizing development and social expenditures.”

As of June 30, 2024, Zimbabwe’s external debt stands at US$12.3 billion, with domestic debt at US$8.7 billion. External liabilities owed to bilateral and multilateral creditors account for US$3.1 billion. Ncube expressed appreciation for ongoing support from development partners, highlighting its significant role in advancing the country’s developmental efforts.

He outlined strategies to enhance collaboration with these partners, including the establishment of sector working groups and a development projects management system, as well as participation in the Global Partnership for Effective Development Co-operation Monitoring Exercise. This initiative aims to maximize cooperation effectiveness and foster mutual learning in development efforts.

By Witness A Phiri