HARARE – The Zimbabwean government has announced a series of measures, including increased taxation, asset sales, and the issuance of new securities, to address the projected budget deficit for 2025.
According to the recently released 2025 Budget Strategy Paper, the government anticipates generating ZiG103.17 billion in revenue, while expenditures are estimated at ZiG111.68 billion. This will result in a budget deficit of ZiG8.5 billion, equivalent to 1.5 percent of GDP.
To bridge this gap, Finance, Economic Development, and Investment Promotion Minister, Professor Mthuli Ncube, stated that the government plans to accelerate joint ventures with state-owned enterprises (SOEs) and explore the sale of non-core assets. Additionally, the Treasury intends to issue new securities such as green bonds, social bonds, diaspora bonds, and debt swaps on both the Zimbabwe Stock Exchange (ZSE) and the Victoria Falls Stock Exchange (VFEX).
ZSE Chief Executive Officer, Justin Bgoni, expressed confidence in the local market’s readiness for these instruments, noting that the ZSE has already begun collaborating with the government on this initiative. “There is trading happening at the moment Over The Counter. We need a more transparent system on the Exchange,” Bgoni said.
On the revenue front, the government plans to broaden the tax base by automatically registering small and medium enterprises for tax purposes and including cross-border online transactions in the tax net. The 2025 taxation proposals will focus on streamlining tax incentives, particularly in the mining sector, to optimize revenue collection.
The government also announced plans to increase the use of the Zimbabwe dollar, with more taxes to be paid exclusively in the local currency. “Already, customs duties are now payable in local currency. Going forward, and in line with the de-dollarisation roadmap, other taxes will also be paid exclusively in local currency, including payment for Government services,” the Budget Strategy Paper stated.
Economists have noted that while these measures are aimed at addressing the budget deficit, their success will depend on the government’s ability to implement them effectively and attract investor confidence.
Financial analyst Malone Gwadu commented on the government’s proactive approach but cautioned that challenges remain. He highlighted the impact of external factors such as El Niño and global commodity price fluctuations on the country’s core productive sectors, particularly agriculture and mining, which could affect budget performance.
“Increasing taxation may not be the best approach, but broadening the tax base through widening the reach of the tax net, particularly in the informal sector, is crucial,” Gwadu said, noting that the informal sector remains largely untapped for tax revenue.
Another financial analyst, Rufaro Hozheri, expressed reservations about the government’s focus on increasing revenue through taxation and the proposal to sell off assets to finance the budget deficit. He argued that Zimbabweans are already overburdened with taxes, and introducing new taxes would be counterproductive.
“Selling off assets to finance a budget in a single fiscal year might not be the best approach,” Hozheri stated, adding that the stability of the Zimbabwe Gold (ZiG) could also be a concern, given the significant depreciation of the local currency on the parallel market.
Walter Mandeya, an analyst with Trigrams Investment, emphasized the importance of careful management of the country’s debt, which currently stands at around US$21 billion. He also stressed the need for the government to focus on expenditure cuts rather than increasing revenue through taxation.
Mandeya commended the government’s push for joint ventures with SOEs and supported innovative financing models but underscored the importance of careful structuring and ringfencing of funds. He also called for stronger legislative protections for investors, citing the example of the Mosi-Oa-Tunya Gold Coins, which he believes should be protected by an Act of Parliament.
In conclusion, while the government’s proposed measures are aimed at addressing the budget deficit, their success will depend on careful implementation and effective management to ensure long-term economic stability.
Source: Business Weekly