Taxes, fees to be paid in ZiG

The Zimbabwean Treasury is set to implement new measures requiring most taxes and fees to be paid exclusively in the Zimbabwe Gold (ZiG) currency, a move aimed at increasing demand and stabilizing its value. This decision comes as the Finance, Economic Development and Investment Promotion Ministry prepares the 2025 National Budget, which is scheduled for presentation next month.

On September 27, the ZiG saw a significant depreciation, trading at US$1.39, down from US$1.99 the previous day. As of yesterday, the dollar was trading at ZiG26.67 in the interbank market. Since its introduction in April as a stable currency backed by US$450 million in foreign reserves, the ZiG has experienced ongoing volatility.

During a dialogue with development partners in Harare, Finance Minister Mthuli Ncube stated that the government intends to require taxpayers to settle a significant portion of their obligations in the local currency. "Already, customs duties are now payable in local currency. Going forward, and in line with the de-dollarisation roadmap, other taxes will also be paid exclusively in local currency, including payment for government services," he said.

In his midterm fiscal policy review, Ncube proposed legislative amendments to allow companies to pay corporate income tax in both local and foreign currency on a 50:50 basis. He also suggested that any corporation with revenue exceeding 50% in foreign currency should account for corporate income tax similarly.

Critics argue that government services, including passport fees, should exclusively accept ZiG to strengthen the local currency's use. However, the government contends that existing arrangements necessitate the collection of certain fees in United States dollars.

Ncube also mentioned plans to restructure some debt terms and conditions, alongside the issuance of long-term securities to mitigate debt servicing costs. He emphasized that fiscal outlays would prioritize critical economic enablers while safeguarding core social programs that assist vulnerable populations.

The minister attributed the growth of national public debt—currently estimated at US$21 billion—as a result of the government's assumption of legacy debts, the central bank's external liabilities, capitalizing the Mutapa Investment Fund, and compensating former farm owners. He affirmed that Treasury would maintain a sustainable budget deficit of less than 3% of the gross domestic product (GDP) and ensure that expenditure aligns with available resources.

Despite these measures, economists have warned that the volatile nature of the ZiG could exacerbate budgetary pressures as the cost of living continues to rise in both local and foreign currencies. Ncube reiterated the government's commitment to fiscal sustainability and the stability of the domestic currency, 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, while domestic debt amounts to US$8.7 billion, with external liabilities owed to bilateral and multilateral creditors, accounting for US$3.1 billion.

Ncube expressed gratitude for the continued support from development partners, which he noted has significantly bolstered the country's developmental efforts across various sectors. He outlined the government's strategies to enhance coordination with these partners, including establishing sector working groups and a development projects management system, as well as participating in the Global Partnership for Effective Development Co-operation Monitoring Exercise. This initiative aims to maximize the effectiveness of all forms of cooperation and foster engagement and mutual learning in development efforts.