Subchapters:
- Basic data
- Public finances and the state budget
- Banking system
- Tax System
Basic data
The country is in a deep and protracted economic crisis, although in 2021 the economy managed to stabilize to some extent after the decline of recent years. Hopes for President Mnangagwa’s 2018 election-led government to liberalize the economy and implement much-needed reforms after the long Robert Mugabe era that left the country’s economy in shambles have not materialized. After a decade of dollarizing the economy in response to the hyperinflation of 2007-2009, the government of Zimbabwe reintroduced the national currency in 2019, the Zimbabwe dollar (ZWL). However, confidence in the new currency is low, and only a limited amount of circulation in low denominations has been issued so far due to fears of inflation. The economy therefore continues to function largely on the basis of the US dollar. The ZWL exchange rate against the USD is steadily weakening. In the course of 2021, however, it was possible to significantly reduce the rate of inflation, which “only” approached 100% (compared to approx. 600% a year earlier) and continues to decline. In an effort to tame inflation, the Central Bank of Zimbabwe has raised the key interest rate twice during 2021, from 35% to 40% and then to 60% and then to 80% in April 2022.
The consequence of the lack of foreign currency is regular problems with the supply of fuel, medicine or food. Approximately 90% of the population is employed in the informal sector and a significant proportion is dependent on humanitarian aid. In response to the COVID-19 pandemic, the government announced severe restrictions on movement, which made economic activity very difficult. The country’s GDP fell by approx. 8% in 2019 and 2020, economic growth of 4.1% is estimated for 2021.
According to cheeroutdoor.com, the country’s economy depends to a large extent on agriculture and mineral extraction. Gold, platinum, diamonds, coal, nickel, chrome and copper are mined in Zimbabwe. The main agricultural commodities are corn, sugar cane, tobacco, cassava, cotton, citrus, bananas, beef and milk. Zimbabwe’s main exports are gold, tobacco, nickel ore and concentrate, platinum, ferrochrome alloy, diamonds, sugar, cotton. In the structure of imports, fuel, food, pharmaceuticals, motor vehicles, and fertilizers occupy the largest share.
| Pointer | 2019 | 2020 | 2021 | 2022 | 2023 |
| GDP growth (%) | -8.1 | -10.2 | 4.1 | 3 | 1.9 |
| GDP/population (USD/PPP) | 1 156.2 | 1 128.2 | ON | ON | 51.4 |
| Inflation (%) | 232.1 | 595.9 | 139.2 | 42.3 | 8.3 |
| Unemployment (%) | 5 | 5.4 | ON | ON | ON |
| Export of goods (billion USD) | 4.3 | 3.8 | 4.8 | 4.6 | 5.2 |
| Import of goods (billion USD) | 3.8 | 3.3 | 4.5 | 4.7 | 4.8 |
| Trade Balance (Billion USD) | -0.6 | 0.7 | 0.1 | -0.2 | 0.3 |
| Industrial production (% change) | -4 | -8 | 5 | 2.9 | 3.2 |
| Population (millions) | 14.7 | 14.9 | 15.1 | 15.3 | 15.6 |
| Competitiveness | ON | ON | ON | ON | ON |
| OECD export risk | 7/7 | 7/7 | 7/7 | ON | ON |
Source: EIU, OECD, IMD
Public finance and state budget
| Public finance | 2021 |
| State budget balance (% of GDP) | 2.8 |
| Public debt (% of GDP) | 104.2 |
| Current account balance (billion USD) | -0.5 |
| Taxes | 2022 |
| AFTER | 24.72% |
| F.O | 40% |
| VAT | 14.5% |
Zimbabwe has run relatively significant budget deficits in recent years, but for 2021, according to estimates, it has achieved a surplus of approximately 2.8% of GDP. In November 2021, the IMF held an Article IV consultation with Zimbabwe, emphasizing in its conclusions the need to loosen the exchange rate regime and restructure the national debt. Zimbabwe does not have the possibility to obtain a loan from the IMF and other international financial institutions (World Bank, African Development Bank) due to long-term unpaid debts to these institutions. In recent years, Zimbabwe has received new loans practically only from China and Russia. China has also sold (or, to a lesser extent, donated) Zimbabwe the vast majority of the COVID-19 vaccines used in the country. An important financial source are remittances from members of the diaspora, of whom there are approximately 6 million in the world and whose amount in 2020 reached approx. 1 billion.
By the end of 2021, the amount of foreign debt reached almost USD 15 billion (over 100% of GDP). Compared to the previous year, it was possible to significantly increase the volume of foreign exchange reserves to approximately USD 600 million.
Banking system
The banking sector is relatively developed and functional. There are currently 20 commercial banks operating in the country, offering most standard services, including letters of credit. Internet and mobile banking are widespread in the country. A list of banks with contacts and information on each of them can be found on the website of the central bank (Reserve Bank of Zimbabwe). Access to credit financing for entrepreneurs is relatively good; in the latest edition of the World Bank’s Doing Business Index in 2020, Zimbabwe was ranked 67th out of 190 countries in this category.
Tax system
The Zimbabwe Revenue Authority (ZIMRA) is responsible for collecting taxes and duties. The tax system is quite confusing. It is based on the principle of taxation of income at source in Zimbabwe and not on the principle of tax residency.
The standard rate of corporate income tax is 24.72% (the basic rate is 24% plus a 3% contribution to the fight against AIDS).
The personal income tax rate is progressive according to the amount of annual income:
- up to $1,200: 0
- $1,201 – $3,600: 0 + 20% for each $1,200 over
- $3,601 – $12,000: $480 + 25% for each $3,600 over
- $12,001-$24,000: $2,580 + 30% for each $12,000 over $12,000
- $24,001-$36,000: $6,180 + 35% for each $24,000 over $24,000
- over $36,000: $10,380 + 40% for each $36,000 over
Other income of natural persons (from business, rental, etc.) is taxed at the corporate rate, i.e. 24.72%.
VAT: The standard VAT rate is 14.5%. Basic foodstuffs, equipment for the production and supply of electricity and drinking water for households are exempt from the tax.
