💰 Analysis of Zimbabwe’s 2026 National Budget and Finance Bill: Driving Growth, Innovation, and Formalisation.A
The 2026 National Budget, along with the accompanying Finance Bill, sets an ambitious course for Zimbabwe, focusing on economic transformation, fiscal discipline, and a strong drive towards industrialisation. Centred around strengthening the domestic currency (ZiG) and expanding the formal economy, the measures introduce significant shifts in the tax landscape, particularly for the mining, digital, and services sectors.
1. The Macroeconomic and Fiscal Landscape
The Budget is underpinned by strong growth projections and a commitment to fiscal prudence, aiming for macroeconomic stability.
Economic Outlook
The government projects robust economic growth in the short to medium term: 6.6% for 2025 and a projected 5.0% for 2026. This momentum is expected to push Nominal GDP to US$52.4 billion in 2025. A key policy goal is to achieve currency stability, with ZiG inflation targeted to fall to single digits in 2026. The Budget also banks on continued strength in external flows, projecting Diaspora remittances of US$2.8 billion in 2026, a vital source of foreign currency.
Fiscal Position
The government is targeting a near-balanced budget for 2026, signaling strong fiscal discipline.
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Total Revenue Target is set at ZiG 288 billion (US$9.4 billion), representing 16.9% of GDP.
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Total Expenditure is pegged slightly higher at ZiG 290 billion (US$9.5 billion), or 17% of GDP.
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This results in a minimal Budget Deficit of ZiG 3.2 billion, equivalent to only –0.2% of GDP.
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Public Debt remains a significant figure at US$23.4 billion, though manageable at 44.7% of GDP.
2. Key Government Spending Priorities
The 2026 budget allocates resources heavily towards human capital development and essential state functions, with a clear emphasis on education and health.
| Sector | Allocation (ZiG Billions) |
| Primary & Secondary Education | ZiG 47.4 bn |
| Defence & Security | ZiG 46.8 bn |
| Health | ZiG 30.4 bn |
| Agriculture | ZiG 26.8 bn |
| Devolution | ZiG 14.4 bn |
| Social Welfare | ZiG 12.7 bn |
| Infrastructure & Roads | ZiG 4.6 bn |
| Youth & Skills | ZiG 1.9 bn |
Education receives the highest allocation, underscoring its role as the primary driver of future economic potential. Substantial allocations are also made to Health and Agriculture, key sectors for public well-being and economic output. The allocation for Infrastructure & Roads remains a focus, albeit lower than the top-tier sectors, reflecting a phased approach to capital projects.
3. Major Policy Shifts: Tax and Investment Measures
The Finance Bill introduces some of the most impactful changes, designed to incentivise local currency use, attract foreign investment in specific sectors, and implement a fairer tax structure in mining.
1. Progressive Gold Royalties
A major restructuring of gold royalties introduces a progressive tax system based on the global gold price. This move aims to increase the government’s take during periods of high commodity prices and standardise the taxation regime.
| Gold Price (US$/oz) | New Royalty |
| 0 – 1,200 | 3% |
| 1,201 – 2,500 | 5% |
| 2,501+ | 10% |
This system is designed to increase government revenue during gold price booms and close arbitrage opportunities between small-scale and large gold producers.
2. Digital Services Tax (New Levy)
In line with global trends, a Digital Services Withholding Tax is introduced. This new levy targets:
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Online streaming services (e.g., Netflix).
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Online subscriptions.
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E-hailing applications.
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Satellite internet services.
This tax will be withheld by banks and payment agents and replaces the existing VAT on imported digital services, formalising and simplifying revenue collection from the digital economy.
3. VAT and IMTT Adjustments
The Budget introduces a dual adjustment to two key consumption and transaction taxes:
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VAT Increase: Effective 1 January 2026, the Value Added Tax (VAT) is increased from 15% to 15.5%. This is explicitly cited as a revenue compensation measure to offset potential losses from the IMTT reduction. However, it is expected to be inflationary in the short term, raising the cost of goods and services.
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IMTT (Intermediated Money Transfer Tax) Reduction: To reduce the cost of business and encourage the use of the new local currency, the IMTT on ZiG transactions is reduced from 2% to 1.5%. The tax on foreign currency transactions remains at 2%. Crucially, the IMTT will now be tax-deductible for Corporate Income Tax, lowering overall business transaction costs and promoting the use of the local currency.
4. 24-Hour Economy Incentives
To encourage round-the-clock production, the Budget introduces several new tax incentives for manufacturers:
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Extra tax deductions for night-shift operating costs.
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Accelerated depreciation on machinery.
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Priority access to import duty rebates.
These measures aim to boost industrial output and create employment, although the final structure is still under consultation.
5. Customs and Import Duty Changes
The Budget seeks to protect local industries while supporting strategic manufacturing:
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Duty Increases: A combination of a specific duty and an ad valorem rate (40% + US$2.50/kg) has been applied to polyester fibre and cotton fabric imports to protect the domestic textile value chain.
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Duty Suspensions: Duty has been removed on raw materials for gas cylinders (steel plates and coils) to support local gas cylinder manufacturing and enhance access to clean energy.
6. Banking & Finance Tax Reform
To improve liquidity and deposit mobilisation within the banking sector, interest paid on bank deposits by financial institutions is now made tax-deductible. This is a direct measure to strengthen the banking system’s capacity.
7. BPO/KPO Tax Incentive Package
In what is described as one of the most aggressive investor-friendly moves, the Budget offers a massive incentive package to attract Business and Knowledge Process Outsourcing (BPO/KPO) firms, targeting the export services industry:
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A flat 15% Corporate Tax rate.
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100% capital allowance in year one.
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Customs duty suspension on equipment.
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Dividend withholding tax exemption.
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A US$1,500 tax credit per employee (YETI).
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A 15% personal tax rate for expatriate specialists.
8. Gold Trading Liberalisation
The Finance Bill formally recognises gold as an investment instrument by legalising individual ownership of certified gold bars. These gold bars can now be legally pledged, traded, sold, or used as collateral, further formalising the gold market.
4. Overall Strategic Direction
The 2026 Budget and Finance Bill represent a concerted effort by the government to transition the economy towards a more formalised, industrialised, and export-led growth model.
The key Positives are the substantial incentives for manufacturing, BPO/KPO, and the 24-hour economy, which signal a strong export and employment drive. The reduction and tax-deductibility of the IMTT for ZiG transactions is a significant boost for businesses operating in the local currency.
The primary Negative and risk is the VAT increase to 15.5%, which, coupled with the new Digital Services Tax, will inevitably increase the cost of living for consumers, potentially offsetting the benefits of the targeted inflation reduction.
In summary, the Budget is strategically focused on creating an investor-friendly environment for key sectors, while managing the nation’s finances to maintain a near-zero deficit, aiming to stabilise the economy and enhance drivers of long-term transformation.
