Treasury to widen tax base, resume TB auctions

Tapiwanashe Mangwiro

THE Government is set to intensify efforts to broaden Zimbabwe’s tax base while resuming the issuance of Treasury Bills (TBs) and bonds through an auction-based system.

This is part of a comprehensive strategy to strengthen public finances, improve debt sustainability and support economic transformation.

The measures are contained in the 2027 Budget Strategy Paper presented to Parliament by Finance, Economic Development and Investment Promotion Minister Professor Mthuli Ncube, which outlines the Government’s fiscal priorities under the National Development Strategy 2 (NDS2).

With domestic resource mobilisation expected to play an increasingly important role in financing development programmes, Treasury says the 2027 National Budget will focus on improving revenue productivity, widening the tax base and modernising tax administration.

“As the country expands implementation of the National Development Strategy 2, sustainable domestic resource mobilisation will remain central to financing Government priorities, accelerating inclusive economic growth and supporting the attainment of Vision 2030,” said Minister Ncube.

He said the Government would continue implementing tax policy and revenue administration reforms aimed at broadening the tax base, rationalising tax expenditures, simplifying tax administration, strengthening tax governance and compliance, improving intergovernmental fiscal coordination and accelerating the digitisation of revenue collection systems.

Economist Mr Malone Gwadu said the proposed reforms reflect the Government’s long-term objective of bringing more economic activity into the formal tax system.

“Zimbabwe’s economy has become largely informal and the Government has a strategic intention to deepen the reach of taxation into the informal sector while gradually encouraging formalisation,” he said.

Mr Gwadu said improving compliance, rather than increasing tax rates, would be critical to expanding Government revenues.

“The strategy speaks to the Government’s policy direction of encouraging compliance and widening the tax net,” he said.

“Rationalising the tax system also supports this objective by reducing compliance costs, while digitisation makes it easier for taxpayers to comply through digital platforms.”

He said stronger intergovernmental fiscal coordination would improve the efficiency of public spending by maximising value for money from tax revenues while strengthening administrative capacity.

On public debt management, Treasury reaffirmed its commitment to restoring debt sustainability through prudent borrowing and continued fiscal discipline.

“The successful implementation of the 10-month Staff-Monitored Programme is critical and will provide a stepping stone for clearing the country’s external debt arrears and securing future financial support from bilateral and multilateral financial institutions,” said Minister Ncube.

He said the Government would continue prioritising concessional financing for critical projects while restricting non-concessional borrowing to economically viable investments with demonstrable repayment capacity.

Treasury pledged to keep fiscal deficits below 3 percent of gross domestic product and maintain its policy of avoiding central bank financing, while limiting the accumulation of domestic arrears owed to service providers.

In a significant development for domestic capital markets, the Government will resume issuing TBs and bonds through competitive auctions. This comes after a period of administrative issuance.

“Considering the prevailing and projected macroeconomic stability associated with a single-digit inflation profile and a stable exchange rate, the Treasury will resume the issuance of Treasury Bills and bonds through the auction-based system, to encourage competitive price discovery and enhance the growth of the primary market and development of a market yield curve,” said Minister Ncube.

Economist Dr Lorraine Nyazema said the return of auction-based issuance marks an important step in strengthening Zimbabwe’s domestic capital market, but cautioned that its success would depend on preserving macroeconomic stability.

“The return of Treasury Bill and bond auctions is a positive step towards strengthening Zimbabwe’s domestic capital market and improving price discovery,” she said.

“However, the strategy depends on maintaining low inflation and exchange rate stability. Key risks include climate shocks, global commodity price swings, fiscal slippages and external financial pressures.”

Dr Nyazema said any deterioration in those fundamentals would affect investor behaviour.

“Should inflation rise or the exchange rate weaken, investors would demand higher yields to compensate for greater risk,” she said.

“That would increase the Government’s borrowing costs and reduce demand for longer-dated securities at auction. Maintaining disciplined fiscal and monetary policies will, therefore, be critical to sustaining investor confidence and ensuring a successful auction programme.”

Dr Nyazema said the Staff-Monitored Programme remains central to Zimbabwe’s debt resolution agenda and future access to affordable development finance.

“The Staff-Monitored Programme is critical because it underpins Zimbabwe’s debt resolution process and prospects for renewed multilateral financing,” she said.

“If implementation is delayed, the Government will have to rely more on domestic revenues, tighter expenditure controls, improved tax compliance and reduced revenue leakages, while expanding public-private partnerships to support infrastructure investment.

“However, these measures cannot fully replace concessional external financing, making continued reform implementation essential for fiscal sustainability and investor confidence.”

Economist Mr Enoch Rukarwa said the Government’s target of containing the fiscal deficit below 3 percent of gross domestic product (GDP) was ambitious, given the prevailing macroeconomic conditions, but recent policy progress suggested the objective was within reach if reforms remain on course.

“When you examine the current macroeconomic dynamics, it is clear the target is challenging,” he said. “However, the authorities have demonstrated encouraging commitment to reducing budget deficits and containing public expenditure.”

Mr Rukarwa said improvements in exchange rate stability and inflation following the introduction of Zimbabwe Gold (ZiG) in April 2024 had strengthened the macroeconomic environment and provided a platform for further gains.

On the Government’s commitment to limit non-concessional borrowing to economically viable projects, he said the policy was sound.