Govt tries to make up for lost USAID with new levi...

Govt tries to make up for lost USAID with new levies

Nyashadzashe Ndoro

Chief Reporter

Finance Minister, Mthuli Ncube, has announced that the country will have to rely on domestic resource mobilisation, namely taxes, to make up for the loss of foreign aid following President Trump's decision to cut funding.

Trump's move, which was made within hours of his inauguration, sets a 12-month timeline for the US to fully disengage from the World Health Organization and halt its financial contributions. The US is the largest donor to the WHO, providing approximately 18% of the organisation's total funding.

Zimbabwe has historically relied heavily on foreign aid, particularly from the US, to support its public health programs. The country has made significant progress in combating HIV/AIDS, with HIV prevalence among adults aged 15-49 years falling from 12.69% in 2019 to 10.49% in 2023.

However, with the loss of US funding, Ncube says that Zimbabwe will have to look inward to mobilise domestic resources to support its development programs. This will involve increasing taxes and improving tax administration to ensure that the country can generate enough revenue to support its needs.

"Zimbabwe relies on PEPFAR from the US government for supporting our HIV/AIDS program. It really means that we have to scale up our funding," Ncube said.

The government has already introduced several new taxes, including a 1% levy on fast food items like pizzas, burgers, and French fries to encourage healthy eating. On top of that, a 20% tax on plastic carrier bags and a 25% tax on rental income from properties converted from residential to business use have been introduced.

Meanwhile, the sugar tax, introduced by Ncube in 2023 to fight cancer, has raised concerns about the transparency of tax collection figures. The tax, initially set at US$0.002 per gram, was reduced to US$0.001 per gram in February 2024 after opposition from industry players. Government figures show that US$18 million was collected from the sugar tax by September 2024, but industry sources suggest that the actual amount raised may be significantly higher.

There are also concerns about how the funds are being used. Health and Child Care Minister Dr. Douglas Mombeshora stated that US$8 million from the sugar tax had been allocated for health purposes, specifically for the procurement of cancer treatment machines and drugs.

However, health economist Prosper Chitambara recently called for the funds to be ring-fenced to ensure they are used for their intended purpose.

"For that to happen, enabling legislation is required. Currently, the funds go into the consolidated revenue fund, which poses the risk of being diverted to other purposes. Ring-fencing would ensure the funds are used for cancer treatment as intended,” he said.

The sugar tax has also had an impact on businesses, with Delta Beverages reporting a 9% decline in volume due to price increases driven by the tax.