Treasury under pressure to back ZiG with fiscal reforms
CLOUDINE MATOLA
Treasury’s mid-term budget review, expected next month, is emerging as a crucial test of the government’s readiness to push ahead with its long-term ambition of adopting the ZiG as the country’s sole currency, with analysts urging Finance Minister Professor Mthuli Ncube with analysts urging Finance Minister Professor Mthuli Ncube to match monetary reforms with bold fiscal interventions, Business Times can report.
As the first half of 2026 draws to a close, markets are watching whether Treasury can complement the Reserve Bank of Zimbabwe’s recent easing measures, including the reduction of the policy rate from 35% to 30%, with tax reforms and spending discipline capable of sustaining exchange-rate stability and rebuilding confidence in the local currency.
The review comes at a time when authorities are maintaining a tight fiscal and monetary stance, inflation remains in single digits and foreign currency reserves have improved.
However, concerns persist over the growing tax and regulatory burden confronting formal businesses.
Treasury has already begun consultations for the 2026 mid-term budget review and the 2027 budget strategy paper, inviting submissions from business, labour, civil society and the public as it evaluates economic performance and sets priorities for the remainder of the year.
Analysts say the review will provide a key indication of whether Zimbabwe has laid sufficient macroeconomic foundations to eventually transition to a mono-currency regime, or whether more structural reforms are needed before such a shift becomes viable.
Economist Enoch Rukarwa said reducing the cost of operating in the formal sector should be one of Treasury’s foremost priorities, warning that excessive taxation and compliance requirements are pushing businesses into informality.
“What remains a major concern ahead of the mid-term budget review is the heavy tax burden facing formal businesses. Many companies are increasingly arguing that it has become cheaper to operate informally than to remain within the formal sector,” Rukarwa said.
“The cumulative effect of taxes and compliance obligations is weighing heavily on business operations. In some cases, these pressures have contributed to companies choosing to delist from the Zimbabwe Stock Exchange and operate privately.”
He added that formal businesses were struggling to compete with informal operators that face fewer regulatory obligations.
“When companies operating under strict regulatory frameworks compete in the same market with informal players, it becomes extremely difficult to compete on pricing and to defend market share,” he said.
Economic analyst Trust Chikohora said the review should place greater emphasis on infrastructure development, including railways, roads, water and sanitation systems, while accelerating investment in irrigation to mitigate the risk of another El Niño-induced drought.
“There should be greater focus on infrastructure development. Zimbabwe needs a functional railway system, improved roads and better water and sanitation infrastructure,” Chikohora said.
“We also need significant investment in irrigation infrastructure in anticipation of another possible El Niño drought. In addition, we continue to advocate for a downward review of the IMTT and adjustments to tax-free thresholds and tax bands to provide relief to workers.”
Another economic analyst, Blessing Nyatanga, expects the review to focus heavily on preserving ZiG stability while supporting productive sectors of the economy.
He said the recent reduction in the central bank’s policy rate would lower borrowing costs and stimulate economic activity, with Treasury likely to reinforce those efforts through further measures aimed at reducing the cost of doing business.
“I expect the mid-term budget review to prioritise sectors that can boost production and strengthen foreign currency earnings,” Nyatanga said.
“The reduction in the policy rate from 35% to 30% should make borrowing cheaper and support economic activity. We have already seen some reduction in licensing costs for businesses, and that trend is likely to continue.”
He said authorities were unlikely to abandon fiscal discipline despite pressure for increased expenditure.
“We do not expect a significant increase in government spending during the second half of 2026, as authorities seek to preserve macroeconomic stability and maintain the single-digit inflation achieved so far,” Nyatanga said.
“Most policy interventions are likely to centre on stabilising the ZiG and laying the groundwork for an eventual mono-currency regime.”
