Business Reporter
The Zimbabwe Gold (ZiG) currency is set to become the primary medium for paying taxes and fees in Zimbabwe, as announced by Finance Minister Mthuli Ncube.
This move aims to increase demand for the ZiG and stabilize its value amid ongoing volatility since its introduction in April.
Recent Currency Performance
As of late September, the ZiG experienced a significant depreciation, with the exchange rate dropping from ZWG13.99 to ZWG24.39 against the US dollar. Currently, the dollar is trading at ZWG26.67 in the interbank market. The ZiG is backed by US$450 million in foreign reserves, which is intended to provide some stability.
Government’s Strategy
Ncube emphasized that the government will require taxpayers to settle a substantial portion of their obligations in ZiG, aligning with a broader de-dollarisation roadmap. Customs duties are already payable in local currency, and the government plans to extend this requirement to other taxes and government services.
To further support the local currency, Ncube proposed legislative amendments allowing companies to pay corporate income tax in both local and foreign currencies on a 50:50 basis, particularly for those earning significant foreign revenue.
Economic Implications
Despite these measures, economists have raised concerns about the volatile nature of the ZiG, which could exacerbate budgetary pressures as the cost of living continues to rise. Ncube acknowledged the challenges posed by the national public debt, which stands at approximately US$21 billion, with external debt at US$12.3 billion and domestic debt at US$8.7 billion.
Conclusion
The government’s initiative to mandate tax payments in ZiG is part of a broader strategy to enhance the currency’s stability and reduce reliance on foreign currencies. However, the success of this approach will depend on addressing the underlying volatility of the ZiG and ensuring that fiscal policies align with economic realities.
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