Zimbabwe Mandates ZiG Payments to Revitalize Local Currency

Zimbabwe’s Treasury is pushing a major shift by requiring taxes and fees to be paid in Zimbabwe Gold (ZiG) currency. This strategic move seeks to elevate the demand and stabilize the struggling currency.

The government’s efforts to bolster ZiG come at a time of heightened volatility. Despite its April 2024 introduction, ZiG’s value has fluctuated significantly. In late September, ZiG plummeted, trading at 24.39 against the US dollar.

This unexpected drop raised concerns about the currency’s reliability. Finance Minister Mthuli Ncube, however, appears undeterred. He announced an expanded policy that mandates local currency payments for a growing list of taxes.

His aim is to stabilize the economy while preparing the 2025 National Budget, which the country eagerly awaits. At the heart of these reforms lies the belief that mandatory ZiG usage could curb the currency’s instability.

Companies are now required to pay corporate income taxes using both local and foreign currency. This is particularly for firms with over 50% of revenue in foreign currencies. The idea is to lessen dependence on the US dollar, which dominates local markets.

Ncube’s policy adjustments come amid intense scrutiny. Some critics argue the government should fully enforce ZiG for all fees, while others caution against heavy reliance on such a volatile currency. Yet, Ncube insists on the necessity of a balanced fiscal plan.

The Treasury is also keeping its eye on social programs, ensuring that budget deficits do not exceed 3% of the GDP. However, Zimbabwe’s economic landscape remains burdened by substantial debt, with a national liability nearing US$21 billion, US$12.3 billion of which is external.

This policy shift reflects a broader challenge Zimbabwe faces: balancing a budget while trying to reinvigorate its local currency. Taxes paid in ZiG are part of this larger equation, one that could alter Zimbabwe’s financial future, but risks remain significant.

The government is under pressure to stabilize the ZiG currency quickly, as its current instability poses risks not just for taxpayers but for the broader economy. With inflation concerns rising, will Zimbabwe’s strategy succeed? Only time will tell.

The Zim Bulletin