RBZ rubbishes Chamisa lawyer's claims on ZiG

The Reserve Bank of Zimbabwe (RBZ) has reaffirmed that the Zimbabwe Gold (ZiG) currency remains the country's legal tender, dismissing speculation that it had expired following the lapse of Statutory Instrument 60 of 2024. Established under the Presidential Powers (Temporary Measures) Act in April, ZiG is part of Zimbabwe's ongoing currency reform efforts to re-establish a viable domestic currency.

In a statement issued yesterday, the RBZ clarified that the expiration of the initial Statutory Instrument does not impact the legal status of ZiG. "Currency reforms do not lapse with the instrument that introduced them but are only revoked by another legal provision," the central bank stated. "The Finance Act 2024, now law, upholds the provisions of SI 60 of 2024, ensuring ZiG's status as the legal tender."

Currency Reforms and Tax Measures to Drive ZiG Stability

The Government has emphasized that a stable domestic currency is essential for economic prosperity, given the constraints associated with relying on foreign currency, particularly the US dollar. Recent measures, such as mandating that at least 50% of certain taxes be paid in the domestic currency, are expected to drive demand for ZiG and foster its stability. These provisions, introduced through the Finance Act 2024, build upon policies that allow companies to account for income tax in both local and foreign currencies on a 50:50 basis.

Finance, Economic Development, and Investment Promotion Minister Professor Mthuli Ncube proposed further tax reforms in his mid-year budget review. These reforms stipulate that companies earning over 50% of their revenue in foreign currency must pay corporate income tax on a 50:50 basis. Similarly, entities receiving over 50% of revenue in local currency must pay taxes proportionally based on their earnings currency.

Encouraging Domestic Currency Use Across Economic Sectors

A significant portion of Zimbabwe's informal sector, comprising an estimated 60-70% of the economy, will also be brought into the tax system under new Finance Act provisions. Informal traders, typically resistant to domestic currency use, will now be required to pay presumptive taxes in local currency, with a 10% presumptive tax applied on monthly rentals. This new regulation encompasses a wide range of businesses, including taxis, restaurants, hairdressing salons, fitness centers, and legal practices.

By expanding the tax base to include the informal sector and mandating tax payments in ZiG, the Government aims to bolster the currency's use and stabilize the economy. These reforms are seen as critical steps toward achieving a stable currency and supporting Zimbabwe's broader economic goals, particularly its goal of becoming an upper middle-income country by 2030.

The RBZ's statement underlines its commitment to promoting ZiG's use, reinforcing that ongoing reforms are integral to supporting a sustainable domestic currency system.