US$141m gold bill surpasses spending limit – IMF

Zimbabwe's gold incentive scheme for artisanal miners had cost the Government US$141 million by the end of April, almost nine times its full-year budget allocation and highlighting growing pressure on public finances.

The figures are contained in the International Monetary Fund's first review under Zimbabwe's Staff-Monitored Programme, which found that spending on gold incentives had reached US$118 million during the first quarter, against an annual budget allocation of just US$16 million.

By the end of April, Government had therefore spent approximately US$125 million more than its entire annual allocation for the programme.

"Gold incentives for artisanal miners—introduced in 2021 to reduce smuggling—reached US$118 million in Q1 (US$141 million by end-April), far above the programme limit and the US$16 million annual budget," the IMF said.

The incentive scheme was introduced to encourage artisanal and small-scale miners to sell their gold through formal channels rather than smuggling it out of the country.

Gold remains one of Zimbabwe's major sources of foreign currency, making the formalisation of artisanal gold production an important component of Government's efforts to increase official gold deliveries and retain export earnings within the formal economy.

However, the scale of incentive payments has significantly exceeded Treasury's original budget provision, raising questions over the sustainability of the programme and its impact on fiscal discipline.

The gold incentive overrun came amid additional expenditure pressures facing Government.

The IMF said other expenditure overruns were driven by front-loaded pension payments, adding further pressure to the fiscus as authorities attempted to contain spending under the IMF-monitored programme.

At the same time, spending on other protected social programmes fell below the minimum level agreed under the programme.

"Other protected social spending was US$84 million below the programme floor," the IMF said.

Government finances were also affected by efforts to clear outstanding obligations, with the IMF reporting that capital spending included a US$95 million net repayment of unaudited arrears.

The figures highlight the competing demands facing Zimbabwe's fiscal authorities as they seek to support gold production, maintain formal gold sales, meet pension obligations, protect social spending and clear outstanding arrears while maintaining expenditure discipline.

The gold incentive programme presents a particularly difficult policy trade-off.

Reducing the incentives could weaken efforts to keep artisanal miners within formal gold markets and potentially encourage renewed gold smuggling. Maintaining payments at their current pace, however, could create further pressure on Government finances and widen the gap between approved budgets and actual expenditure.

The IMF figures suggest that the gold incentive scheme has evolved from being primarily an anti-smuggling and gold-sector formalisation measure into a significant fiscal-management issue.

With expenditure reaching US$141 million by the end of April, the programme had consumed approximately 8.8 times its full-year budget allocation in just four months.

The Government must now balance the need to maintain incentives that encourage artisanal miners to sell through formal channels against the need to prevent the programme from becoming an open-ended burden on the national budget.

The challenge is particularly significant given Zimbabwe's broader fiscal pressures, with pension obligations, social spending requirements and arrears clearance competing for limited public resources.

The latest figures are likely to intensify scrutiny of the design and cost of the incentive scheme and raise questions about whether a more targeted and fiscally sustainable approach can preserve the programme's anti-smuggling benefits without undermining expenditure controls.