Zimbabwe to expand ZiG-only taxes

The Government is set to widen the range of taxes payable exclusively in Zimbabwe Gold (ZiG) as part of efforts to increase demand for the local currency and accelerate its adoption across the economy.

Finance, Economic Development and Investment Promotion Minister Professor Mthuli Ncube is expected to announce the new measures when he presents the 2026 Mid-Term Budget and Economic Review Statement this week.

The reforms are aimed at deepening the use of ZiG by requiring a broader range of tax obligations to be settled in the local currency.

Authorities view tax payments as one of the most effective mechanisms for creating sustained demand for ZiG because they represent recurring financial obligations for businesses and individuals.

By expanding the number of taxes payable exclusively in ZiG, Treasury hopes to increase the circulation of the local currency while reducing reliance on the United States dollar in domestic transactions.

Currently, most major taxes administered by the Zimbabwe Revenue Authority (ZIMRA) can be paid in United States dollars where the underlying income, transaction or pricing is denominated in foreign currency.

Under Zimbabwe's multi-currency system, taxpayers generally settle their obligations in the currency in which their income or revenue is earned.

In an interview, Prof Ncube confirmed that Government would continue broadening the range of taxes payable in ZiG.

"Oh yes, going forward, this is an ongoing programme," he said.

"Treasury will expand the range of taxes that will be paid in ZiG in order to increase the demand for the local currency. We need to make sure we do that. It (ZiG) is now very stable, and we believe that in order to support the circulation of the currency within the economy, the demand ought to go up."

Government has not yet disclosed which taxes will be affected by the latest reforms, leaving uncertainty over whether the measures will extend to Pay As You Earn (PAYE), Value Added Tax (VAT), customs duties, corporate income tax, capital gains tax or other statutory levies.

The planned changes form part of Government's broader strategy to eventually restore the local currency as the sole medium of exchange for domestic transactions.

Monetary authorities have identified eight key conditions that must be met before Zimbabwe transitions to a mono-currency system.

These include sustained macro-economic stability marked by single-digit inflation, foreign currency reserves equivalent to between three and six months of import cover, exchange rate stability, efficient foreign exchange management, increased demand for the local currency, financial sector stability, an efficient National Payments System, and strong coordination between fiscal and monetary policy without monetisation of the national budget.

According to the Reserve Bank of Zimbabwe, six of the eight benchmarks have already been achieved, with only two outstanding: increasing demand for ZiG and building foreign currency reserves to internationally recommended levels.

The latest tax reforms come as confidence in ZiG continues to strengthen.

Reserve Bank data shows that the proportion of ZiG transactions processed through the National Payments System has risen from about 26 percent when the currency was introduced in April 2024 to between 35 and 40 percent of all electronic transactions.

Authorities have also reported declining cases of discriminatory pricing and growing acceptance of the local currency by businesses.

Prof Ncube said Government would continue implementing complementary measures aimed at strengthening public confidence in ZiG.

"Of course, we have to build other measures to build confidence," he said.

"Sometimes it's about confidence and we believe that confidence is going up if you put it every day around the currency, but we will also, in addition to that, be expanding use of the ZiG going forward."

Treasury has already introduced a number of initiatives to stimulate demand for the local currency.

These include requiring companies to settle 50 percent of their Quarterly Payment Dates (QPDs) in ZiG, paying public sector suppliers in the local currency, and reducing the Intermediated Money Transfer Tax (IMTT) on ZiG transactions from 2 percent to 1.5 percent while maintaining the 2 percent rate for United States dollar transactions.

Government is also increasing the availability of physical cash to support wider use of the currency.

Prof Ncube said ZiG had remained stable since its introduction and confirmed that higher denomination banknotes would soon be released.

"I think if you just look at it now, since 2024 really, the ZiG has been stable and also the demand of the currency has been quite strong and stable, but also we are introducing other notes which will be introduced into the market to increase the circulation and access to the cash aspect of the currency," he said.

President Emmerson Mnangagwa was recently presented with the new ZiG100 and ZiG200 banknotes by Reserve Bank of Zimbabwe Governor Dr John Mushayavanhu.

The new denominations will complement the existing ZiG10, ZiG20 and ZiG50 notes and are expected to improve access to cash while encouraging wider use of the local currency.

Meanwhile, the Reserve Bank is also strengthening the reserve backing of ZiG ahead of the planned transition to a mono-currency system.

The central bank aims to increase reserve cover to the equivalent of two months of imports by year-end, moving closer to the international benchmark of between three and six months.

Gold reserves, which account for about 40 percent of the country's reserve assets, have grown from 1.5 tonnes when ZiG was introduced in April 2024 to 4.5 tonnes as of last month.

Government ultimately intends to increase the country's gold holdings to approximately 11 tonnes before adopting a mono-currency regime.

Reserve Bank Governor Dr John Mushayavanhu recently said expanding the use of ZiG for public sector goods and services would further strengthen demand for the local currency.

"As the largest economic agent, Government's demand and supply have an economy-wide impact, transcending all sectors and markets. As a result, the recalibration of Government taxes and payments will steer the rest of the economy towards the increased use of ZiG," he said.