TREASURY is banking on sugar, fast food and alcohol taxes to recoup the loss of hundreds of millions of United States dollars in official development assistance (ODA), it has been revealed.
In the 2025 National Budget, Treasury had budgeted US$800 million as ODA to cover the rising demands.
However, the coming in of United States President Donald Trump on January 20 saw the American government cut foreign aid to manage that country’s burgeoning debt of over US$35 trillion.
For Zimbabwe, this aid cut resulted in the country losing about US$327 million. The average foreign aid allocated to the southern African nation over the past five years is US$348 million.
Zimbabwe will receive US$21 million in aid from the United States this year, according to the American Government’s Foreign Assistance website.
“The economy faced the worst drought in 40 years in 2024, while tourism and construction sectors continued to grow,” Finance, Economic Development, and Investment Promotion minister Mthuli Ncube said at a panel discussion on Zimbabwe’s Arrears Clearance and Debt Resolution Process during the African Development Bank’s (AfDB) annual meetings on Monday.
“Growth is projected to rebound to 6% in 2025, driven by agriculture recovery, manufacturing, and investments in mining.”
He said efforts to enhance fiscal sustainability resulted in an improvement of the revenue-to-GDP (gross domestic product) ratio to 17% in 2024, reflecting stronger tax collection and efficiency measures.
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This is being supported by a slew of new taxes, such as the 1% fast-food tax, a US$0,001 sugar tax per gramme of sugar in beverages and an excise duty on alcoholic beverages of US$0,30 per litre (from US$0,25) that kicked in this year.
“Fiscal consolidation is underway through a combination of expenditure rationalisation and a domestic resource mobilisation strategy. Q1 2025 revenue exceeded targets by 8%, demonstrating effective revenue mobilisation and improved compliance,” Ncube said.
“Social protection has been strengthened through internal budget reallocations and protection of the ARV drug supply. Government has acted swiftly to offset the loss of ODA (US$300 million - $500 million) by tapping domestic sources — sugar, fast foods and alcohol taxes.”
Ncube spoke during a panel discussion on Zimbabwe’s Arrears Clearance and Debt Resolution Process being spearheaded by AfDB President Akinwumi Adesina and former Mozambican President Joaquim Chissano.
“January to April average month-on-month inflation: 2,9% (ZiG) and 3% (US$). April 2025 year-on-year inflation: 85,7% (ZiG) and 14,4% (US$),” Ncube said.
“ZiG month-on-month inflation is expected to stabilise below 1,5%, with December 2025, year-on-year inflation forecast at 25,6%.”
He said exchange rate reform via the ‘willing-buyer willing-seller’ system had improved forex market efficiency and narrowed the parallel market premium with the first quarter average rate of US$1: ZiG26,42.
He added that from a current account surplus of US$500 million in 2024, which is 4% of GDP, the Treasury expected US$277,4 million for the year, supported by diaspora remittances and a narrowing trade deficit.
