Cash-Strapped Govt Turns to Informal Sector for Revenue

Cash-Strapped Govt Turns to Informal Sector for Revenue1 August 2025

Cash-Strapped Govt Turns to Informal Sector for Revenue

By A Correspondent

Finance Minister Mthuli Ncube has revealed that the government is working on new measures to tax Zimbabwe’s informal sector, in a bid to expand its revenue base amid tightening fiscal constraints.

Presenting the 2025 Mid-Term Budget Review Statement in Parliament on Thursday, Ncube said the Treasury was actively exploring ways to integrate the informal economy into the tax system.

“The informal sector remains a critical component of our economy,” Ncube said. “However, it also presents challenges in terms of revenue collection. Government is therefore considering new measures to bring this sector into the tax net in a fair and sustainable manner.”

No specific timeline or detailed framework was provided, but the Minister insisted that any approach would be aimed at formalising the sector without stifling economic activity.

“We want to ensure that small businesses are not burdened but supported to grow while contributing meaningfully to national development,” he added.

The announcement comes as Treasury has already spent 35% of the approved 2025 national budget — approximately US$3.3 billion — with limited room to increase spending. Ncube emphasized that the government would maintain a strict fiscal discipline and ruled out any budget extensions. “There is no intention to increase the budget.

The remaining 65% is sufficient to take us to the end of the year,” he said.

Although the government has set an ambitious economic growth target of 6% for 2025, Ncube admitted that GDP growth for 2024 has been revised downward to just 1.7%. Meanwhile, he pointed to a 30.2% rise in foreign currency inflows during the first half of the year, claiming it reflected improved confidence in the economy.

Ncube also highlighted structural changes in the economy, noting that manufacturing now contributes 15.3% of GDP — surpassing agriculture. However, agriculture is expected to rebound strongly in 2025 with projected growth of 21.1%, supported by ongoing investments and regulatory reforms.

The Finance Minister said government would continue reviewing business licences, fees, and regulatory frameworks, particularly in the agricultural sector.

“Within two weeks, we expect to complete the review of agricultural regulations and fees to remove bottlenecks affecting productivity,” he said.

Despite Ncube’s reassurances, the proposed taxation of the informal sector has already raised concerns among traders and small business operators, many of whom feel overburdened by existing costs and levies. Critics argue that the move is a sign of desperation by a government that has run out of new revenue streams.

With public debt now standing at 46.5% of GDP (in US dollar terms), the pressure on Treasury to find additional funds is mounting — and for many, the informal sector is the easiest target.

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Source: ZimEye