HARARE – Finance Minister Mthuli Ncube has abandoned plans to introduce a cash withdrawal levy, conceding that the proposed tax risked discouraging Zimbabweans from depositing money in banks.

Ncube announced the climbdown in Parliament this week, barely a month after unveiling the levy in his 2026 budget statement, following sustained criticism from lawmakers, businesses and the public.

“I have listened to the argument. Treasury has been listening. I have listened closely to the debate from MPs and the public regarding the cash withdrawal levy proposals. Therefore, I hereby propose that we repeal that whole Clause 7,” Ncube said while citing the relevant section of the 2026 Budget Bill.

He said the repeal was necessary to ensure the measure did not become “a big penalty” that would deter citizens from keeping their money in the banking system.

In his budget speech last month, Ncube had argued that surging cash withdrawals, largely driven by Zimbabwe’s expansive informal economy, were placing strain on the financial system.

“On average, ATM withdrawals amounted to approximately US$265.8 million per month between April 2024 and June 2025, of which over 90 percent were in United States dollars,” Ncube told Parliament.

He added that banks were currently holding close to US$1 billion in cash and Nostro balances to meet withdrawal demand, with withdrawals peaking at US$353 million in June 2025.

To curb what Treasury described as excessive cash usage and the migration of funds into the informal sector, the budget had proposed a tiered levy on cash withdrawals.

Under the plan, individuals would have paid no charge on withdrawals between US$0 and US$500, with a 3 percent levy applied to amounts between US$501 and US$10,001. Corporate withdrawals of up to US$5,000 per month would have remained exempt, while amounts between US$5,001 and US$10,000 would have attracted a 2 percent tax, rising to 3 percent for withdrawals above US$10,000. Local currency transactions were to remain untaxed.

The proposal triggered widespread backlash from bankers, businesses and consumers, who warned it would undermine financial inclusion and push more activity outside the formal system.

Only days earlier, Ncube and Treasury permanent secretary George Guvamatanga had publicly defended the levy during a post-budget briefing, arguing it was necessary to stem cash leakages into the informal economy.

“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,” Guvamatanga said at the time. “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.”

He questioned why corporates would require large volumes of physical cash, noting that withdrawals accounted for about 20 percent of banks’ total income.

Ncube had echoed the same sentiment, insisting the levy was justified because it targeted money exiting the formal banking system.

“What we are taxing is money that is exiting, going one way,” he said then. “Corporates walking around with US$10,000 cash – what are they doing with it?”