The Government of Zimbabwe yesterday put into effect a 1% tax on foreign payments announced by Minister of Finance and Economic Development Mthuli Ncube on May 29.

This means whenever a business pays a foreign supplier, using forex from the interbank market or auction, they now pay a 1% tax.

The money goes into a debt redemption fund to service foreign debt.

Zimbabwe, which had more than $14 billion in external debt as of September 2022, has not been able to secure financing from the likes of the International Monetary Fund in more than two decades, due to its arrears.

According to the latest Treasury statistics, arrears remain a major challenge to the country’s economy, constituting more than 77% of total external debt.

Zimbabwe’s current debt stock is officially reported to be around USD17.5 billion, with USD14 billion accounted as external debt as of September 2022. The accumulation of external debt payment arrears and penalties is estimated at USD6.3 billion, with arrears to multilateral development banks, including the African Development Bank, the World Bank, and the European Investment Bank.

Due to its arrears, the Zimbabwean government’s capacity to borrow has been negatively affected as the country has not received loans from lenders such as the International Monetary Fund (IMF) and World Bank for more than two decades.