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Fiscal Consolidation Shows Positive Results, Treasury Reports

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The Government’s fiscal consolidation efforts are yielding positive outcomes, as demonstrated by the reduction of budget deficits that previously threatened macro-economic stability, according to a senior official.

Addressing delegates at the Chamber of Mines of Zimbabwe annual congress in Victoria Falls last week, Finance, Economic Development, and Investment Promotion Deputy Minister David Mnangagwa highlighted these achievements.

Since taking office in November 2017, the current administration has implemented various measures aimed at fostering economic recovery and growth. These initiatives included the Transitional Stabilisation Programme (October 2018-December 2020) and the National Development Strategy I (NDS 1) 2020-2025.

NDS 1, set to be followed by NDS II, is designed to transform Zimbabwe into a prosperous upper-middle-income society by 2030. As part of these efforts, the Government has enforced measures such as the value for money principle and mandated all government departments and local authorities to collect fees and levies in local currency, except in specific cases. These policies aim to curb inflation, speculative behavior, and arbitrage activities.

“On the fiscal side, our consolidation measures have successfully contained budget deficits, which previously undermined macroeconomic stability. Since 2018, the economy has recorded budget deficits below three percent of GDP,” Deputy Minister Mnangagwa said. “This achievement is due to fiscal measures focused on revenue enhancement and expenditure containment. The Government will continue to uphold this milestone crucial for economic stability.”

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Since August 2022, the Government has prioritized value for money in public procurement, ensuring efficient use of public funds. This involves revising procurement processes and exercising due diligence to avoid overpriced products.

“The Government is strengthening the Public Procurement Act and related regulations to eliminate price distortions and speculative tendencies. We have standardized prices for goods supplied to all Government Departments,” Mnangagwa added.

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Acknowledging the mining industry’s high production costs, Mnangagwa outlined several tax incentives to minimize these expenses.

These incentives include allowable deductions, assessed losses, tax exemptions, and VAT deferment. For example, all capital expenditure on exploration, development, and operations is fully deductible. There is no restriction on carrying forward tax losses, and corporate income for holders of a special mining lease is taxed at a special rate of 15 percent, with potential exemptions from certain non-resident taxes.

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Mnangagwa emphasized the Government’s commitment to the structural transformation of the economy through value addition and beneficiation of mineral resources. He urged the mining and manufacturing sectors to enhance existing value chains, create jobs, and boost exports, contributing to Zimbabwe’s vision of becoming a prosperous upper-middle-income society by 2030.

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