‘New cash withdrawal tax could collapse banking confidence in Zimbabwe’

HARARE – The Government of Zimbabwe’s decision to introduce an intermediated money transfer tax (IMTT) on cash withdrawals has drawn warnings from economists and policy analysts, who say the measure risks undermining already-fragile public confidence in the banking system.

Presenting the 2026 National Budget in Parliament on Thursday, Finance, Economic Development and Investment Promotion Minister Mthuli Ncube announced that the IMTT, previously levied largely on electronic transfers, will now also apply to cash withdrawals.

The move forms part of a broader overhaul of the tax, which also includes lowering the ZiG-denominated IMTT rate from 2% to 1.5% and maintaining the 2% levy on foreign currency transactions.

Analysts say the introduction of a withdrawal tax could have significant unintended consequences, particularly in an economy where banking confidence remains low and cash circulation is often preferred over electronic payments.

Renowned economist Professor Gift Mugano warned that the withdrawal levy would discourage depositors from banking money, undermining liquidity within the formal financial system.

“People will not bank money. If they don’t bank the money, how will your retailers get credit?”

Mugano said, adding that the new charge could push more economic activity into informal cash-based markets.

“How is the budget progressive when Treasury increases VAT and maintains IMTT – this will be passed on to customers at higher prices.

“This will militate against sustainability of the retail sector-the general public will choose Tuckshops ahead of formal shops because your formal shops will be expensive,” he said.

Former opposition legislator and policy analyst Fadzayi Mahere also criticised the measure, describing it as punitive for ordinary Zimbabweans already facing some of the highest banking charges in the region.

Mahere argued that the tax sends the wrong signal in an environment where citizens are already reluctant to use formal banking channels.

“Why are you introducing a tax for withdrawing cash when bank charges are already so extortionate? Can you not see that you’re going to disincentivise use of the banking system?” Mahere wrote.

“In normal countries, banking money earns you interest, in Zimbabwe, why do you punish people for using formal banking channels?”

Mahere also alleged that politically connected individuals often operate outside the formal banking system, making the withdrawal tax disproportionately burdensome on ordinary depositors.

Business groups have echoed these concerns, arguing that Zimbabwe’s tax regime, already viewed as one of the most burdensome in the region, is creating incentives for businesses and consumers to avoid formal structures.

Employers Confederation of Zimbabwe and Zimbabwe National Chamber of Commerce have long called for the IMTT to be abolished rather than expanded, citing its distortionary impact on transactions and business liquidity.

Even the ruling Zanu-PF itself, at its recent Annual People’s Conference in Mutare, went as far as passing a resolution urging that the tax be scrapped, an unusual admission from the ruling party of the hardship the IMTT has inflicted.

While Ncube acknowledged that the IMTT has become distortionary in a dual-currency environment, he defended the measure on the grounds of fiscal stability, noting that the tax contributes about 8% of total revenue annually.

He said the government would continue to monitor and review the tax as part of broader efforts to improve competitiveness and the ease of doing business.

“These compliance conditions will ensure that the benefit of deductibility accrues only to tax-compliant operators, thereby reinforcing ongoing efforts to broaden the tax base and encourage formalisation of businesses,” Ncube said.

“These measures are expected to result in an estimated revenue forgone of approximately US$89 million per annum, representing a fiscal adjustment consistent with prudent management. These measures take effect from January 1, 2026.”

Analysts have, however, cautioned that the combination of the new withdrawal tax, unchanged 2% IMTT on USD electronic transactions, and the budget’s 0.5% Value Added Tax increase may further erode confidence in the formal economy and push consumers toward informal markets where transaction costs are lower.