The Zimbabwean government’s proposed Cash Withdrawal Levy has ignited a wave of criticism, with citizens, analysts and opposition figures accusing Finance Minister Professor, Mthuli Ncube and Treasury Permanent Secretary, George Guvamatanga, of being dangerously disconnected from the realities of the country’s cash-dependent economy. Speaking at a post-budget meeting held in Harare recently, Guvamatanga insisted the new tax on US dollar withdrawals would not discourage banking habits and was instead designed to stem the flow of cash into the informal sector. “All the cash or most of the cash finding its way into the informal system actually emanates from the formal system.
It’s coming from the banks, so when you say it would discourage banking, no, the money is already in the banks but it’s going out into the informal system and not coming back to the banks,” he said. Guvamatanga defended the withdrawal thresholds, which exempt individuals withdrawing up to US$500 and corporates withdrawing up to US$5 000 per month from the levy. “For individuals, if you withdraw US$500, there is no charge.
For corporates withdrawing US$5 000, there is no charge. As a corporate, why would you want to withdraw more than US$5 000? Why would you want more than US$5 000 in cash?” said the Permanent Secretary, adding that banks already earned “20 percent of their total income from cash withdrawals.” The finance minister echoed this view, arguing the new levy was justified because physical cash originates from the formal banking sector.
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“Really, we feel the source of all this cash is the formal sector in the first place, it is the banking sector. What we are taxing is money that is exiting, going one way, so we really feel this is indeed justified,” Prof Ncube said. “At US$500, I don’t expect civil servants to spend a lot of time withdrawing their cash; they should keep their money in there, within that US$500 limit.
Corporates, I’m thinking of corporates walking around with US$10 000 cash. What are they doing with it? You can see how we are thinking, that the way it is structured is ok; it’s consistent with normal transaction behaviour.” However, analysts interviewed by CITE said the comments demonstrate a persistent disconnect between Treasury officials and the lived economic realities of Zimbabweans.
Analyst, Bernard Magugu, said both officials were correct that some cash originates in the formal sector, however their interpretation ignores the deeper structural reasons behind Zimbabwe’s overwhelming dependence on physical US dollars. “These comments by the Finance Minister and Permanent Secretary reveal a deep contradiction at the heart of Zimbabwe’s financial system and highlight how policy continues to treat symptoms rather than causes,” he said. “To be objective, yes, a significant portion of the cash circulating in the informal economy can originate from the formal banking sector. But that should now cover the structural reasons why that money leaves the formal system and does not return.”
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