Budget under Parly scrutiny

KUDAKWASHE CHIBVURI

Parliament has subjected the proposed 2026 national budget to sharp scrutiny, pressing Treasury to revisit key tax measures, including the United States dollar tax on electronic transactions known as Intermediated Money Transfer Tax (IMMT) and the proposed cash-withdrawal levy, warning that failure to address these concerns could undermine the National Development Strategy 2 (NDS2).

Finance Minister Professor Mthuli Ncube proposed reducing the ZiG IMMT from 2% to 1.5% while retaining the 2% levy on US-dollar electronic transfers. Lawmakers, however, say the changes are inadequate and could create distortions that weaken revenue collection and discourage formal banking.

Professor Ncube’s adjustment to the Zimbabwe Gold (ZiG) IMTT has been widely dismissed as largely symbolic, particularly after the corresponding increase in VAT from 15% to 15.5%.

Presenting a report of the Parliamentary Portfolio Committee on Budget, Finance and Investment Promotion during the Finance Bill debate, committee chairperson, Lincoln Dhliwayo who is also MP for Chipinge East, said there is need for a review of the IMMT on US dollar-denominated transactions as failure to do that will have consequences.

“Further, the two‑tier system rates of IMTT between the ZiG and the USD are likely to create market distortions that nudge merchants and consumers to either transact in USD cash or use the ZiG mainly on electronic transfers,” Dhliwayo said.

“Whereas the policy promotes demand for the local currency, it is likely that the bulk of US dollar transactions will be in the form of cash. This undermines IMTT revenue generation. In this regard, it would be ideal to level the playing field by ensuring that the reduction applies across transactions in different currencies,” he added.

Dhliwayo said that the proposed Cash Withdrawal Levy has to be looked into as it will discourage large foreign currency withdrawals and force companies to keep money in safes instead of banking.

“The Committee feels that this measure seeks to discourage large foreign-currency cash withdrawals. It compels various stakeholders to make payments through digital platforms, which creates an audit trail of transactions, thereby reducing the risks of tax evasion and foreign currency leakages.”

He, however, said Zimbabwe is currently not in a position to encourage such.

“The policy would be ideal in a country with strong digital infrastructure, internet connectivity and electricity supply that enables people in remote areas to digitally transact. Without such supportive infrastructure, the country may not realize the intended objectives. The downside risk of the 3% charge is that most of the companies in the emerging sector (constituting 76% of the economy) would possibly prefer to keep money in safes than to deposit it in a financial institution. To minimise distortions in the economy, such a tax should be kept as low as practically possible,” Dhliwayo said.

Chairperson of the committee on Energy, Chalton Hwende said there is need for the government to get its priorities right adding funding allocated to the relevant ministry was insufficient.

“The Ministry requires a dedicated office building with adequate space to accommodate all its departments. At present, the Ministry is operating from premises owned by the Ministry of Local Government, the space is inadequate to meet its administrative and operational needs,” he said.

“Securing an appropriate, purpose-designed building would create a more conducive and dignified working environment, thereby enhancing staff productivity, coordination across departments and overall service delivery.”

He said the Ministry’s subscription budget was significantly underfunded and posed a risk of failing to get funding from key institutions.

“The Ministry had submitted a requirement of ZWG20 000 000 (USD666 667) to meet its international subscription obligations. However, the Treasury allocated only ZWG122 000 and this allocation is only sufficient to cover the Ministry’s subscription to the International Renewable Energy Agency (IRENA), leaving no provision for the International Atomic Energy Agency (IAEA) subscriptions,” Hwende said.

“Zimbabwe, as a member state of the IAEA, is obligated to meet its annual financial contributions and to settle outstanding arrears. Failure to do so risks jeopardising the country’s standing within the agency and may limit access to technical cooperation support valued at over EUR1 000 000. Adequate funding for international subscriptions is therefore essential to safeguard Zimbabwe’s participation in global energy development frameworks and to ensure continued access to capacity-building, technology transfer, and technical assistance programmes.”

Transport and Infrastructural Development committee chairperson Knowledge Kaitano said the 6% allocation against what they proposed compromises set target.

“The Committee is concerned whether the Ministry’s 6% budget allocation against their ideal bid will compromise these already mentioned gains,” he said.

“Of importance is that, the country set good standards through the Ministry of Transport which resoundingly scooped several awards during the course of the year and therefore, public expectations are very high come 2026. This 6% allocation will hinder the public confidence that the Government can deliver,” he said.

He said the government must also increase the funding for the National Railways of Zimbabwe.

“Treasury must allocate more funds to NRZ as this will reduce the damage on our roads by overloaded haulage trucks and also must release co-payments required for NRZ to receive the loan facility from China.”

The Public Accounts Committee Chairman Caston Matewu said the government must adequately resource the Public Accounts Committee to effectively conduct its duties and protect the country from looters.

“The Committee commended the Treasury for fully allocating ZWG154. 8 million towards the rehabilitation of Burroughs House. However, the Committee is concerned about the continued delays in the release of actual cash. The Office currently rents inadequate office space at PAX House for USD17 000 per month while also recruiting additional staff. Any delay in the rehabilitation project risks worsening staff morale and operational efficiency.”