By a Correspondent
Economic analyst Professor Gift Mugano has urged the government to introduce policy measures that would increase demand for the Zimbabwe Gold (ZiG) currency, arguing that stronger incentives are needed to support its stability and wider adoption in the economy.
Speaking on proposals submitted during consultations for the Mid-Term Economic and Fiscal Review, Prof Mugano said the government could use part of the country’s foreign currency revenues to strengthen reserves while creating greater circulation of ZiG.
“It is known that about 75 to 80 percent of the revenue received by Zimbabwe is in US dollars. Our submission is that the Minister of Finance should make a decision based on a sensitivity analysis and take, for example, US$2 billion and give it to the Reserve Bank of Zimbabwe,” said Prof Mugano.
“The Reserve Bank can then print ZiG for the Ministry of Finance, which can be used in government transactions and payments. This would help build confidence in the local currency while increasing foreign currency reserves.”
Prof Mugano also called for amendments to the Finance Act to allow taxes to be paid in any currency, rather than requiring businesses trading in US dollars to settle their tax obligations exclusively in the same currency.
“We feel that the Finance Act should be amended so that it does not strictly call for the payment of taxes in the currency of trade. At the moment, businesses trading in US dollars are required by law to pay taxes in US dollars. They should be allowed to pay in any currency,” he said.
He further proposed tax incentives that would make it cheaper for businesses to settle some tax obligations in ZiG and more costly to do so in US dollars.
“That should be supplemented through the Mid-Term Economic and Fiscal Review by reducing the tax burden for those paying in ZiG and making it more expensive to pay in US dollars. In that way, government creates demand for ZiG,” Prof Mugano said.
He explained that if businesses were required to pay a portion of Value Added Tax (VAT) in ZiG, they would retain the currency rather than disposing of it on the parallel market.
“If I have to pay VAT with 30 percent in ZiG and 70 percent in US dollars, I will keep ZiG to settle my VAT obligations. The same applies to customs duties. That is what will stimulate demand for ZiG,” he said.
“No one will run to the black market to sell ZiG when they know that at the end of the month they need that currency to settle tax payments.”
According to Prof Mugano, the proposed arrangement would also help the country build foreign currency reserves over time.
“Because Treasury would be transferring US dollars to the Reserve Bank and receiving ZiG in return, we would be building reserves. If US$2 billion is set aside this year, reserves could rise to about US$3.6 billion. If the same is done again in 2027, reserves could exceed US$5 billion,” he said.
“And when you have those levels of reserves, you have the capacity to support and defend your currency.”
Prof Mugano said the proposals had been presented during consultations on the Mid-Term Economic and Fiscal Review and were “well received” by policymakers. He expressed hope that some of the recommendations would be incorporated into future fiscal and monetary policy measures aimed at strengthening the ZiG and promoting macroeconomic stability.
