Mthuli under pressure to deliver credible budget

LIVINGSTONE MARUFU / ROBIN PHIRI / SAMANTHA MADE

Finance Minister Professor Mthuli Ncube today presents his 2026 National Budget, a fiscal blueprint expected to confront an economy weakened by decades of debt arrears, a shrinking industrial base, surging informality and mounting pressure on public revenues.

Zimbabwe’s public debt has surged to US$21.5bn, most of it in arrears. Business leaders, economists and investors insist this budget must mark a decisive turning point, one that moves beyond rhetoric to concrete structural reforms.

At the heart of expectations is the hope that Professor Ncube will shift arrears clearance and debt resolution from political promise to executable plan, while also addressing the controversial Intermediated Money Transfer Tax (IMTT),the 2% levy that business wants scrapped but Treasury relies on it  to sustain its revenue base.

Professor Ncube enters Parliament today under intense scrutiny. He must convince citizens, industry and international lenders that he can anchor macroeconomic stability, restore confidence, and meet overdue obligations, even as fiscal space tightens due to weakening revenues, swelling recurrent spending and a diminishing tax base.

Economists warn that without a credible roadmap to tame the US$21.5bn public and publicly guaranteed debt, Zimbabwe risks remaining excluded from global capital markets indefinitely. Of this amount, US$12.6bn is external debt, largely arrears and legacy liabilities, while US$8.9bn is domestic debt, straining local banks and undermining long-term credit growth.

Tatenda Nyachega, chief economist at CEO Africa Roundtable, said clarity is essential.

“We have a concerning issue with rising public debt, estimated at US$21.5bn, and we also expect the national budget to provide a clear public debt sustainability strategy,” Nyachega told Business Times.

Scepticism, however, remains deep, particularly around transparency over state assets and treasury operations. Economist Tony Hawkins said the government’s progress on arrears clearance has been inadequate.

“The country needs an honest statement of national debt on how it is going to settle it as well as a detailed and honest set of Mutapa accounts. You can be sure that nothing like this will be in the budget which I expect to be the usual litany of semi-truths and omissions of crucial data that we used to get before we had a genius as Finance Minister,” Hawkins said.

Investment analyst Tafara Mtutu said debt resolution has become the central barrier to investment.

“I’m expecting the Treasury boss to prioritise local and international debt resolution before anything else in an effort to attract foreign direct investment,” Mtutu said.
“The Minister can also improve allocative efficiencies and cut government expenditure by reducing the wage bill. An incentive for private-sector players that employ ex-government workers is one option.”

The Confederation of Zimbabwe Industries (CZI) echoed the concern.

“CZI is worried that the Zimbabwe government continues to be unable to access external lines of credit due to arrears,” the industry body said.
“The country’s elevated risk premium is making it more costly for the private sector to access external lines of credit.”

Banks are also tightening their stance. The Bankers Association of Zimbabwe (BAZ) urged Treasury to restructure and settle domestic Treasury Bills and arrears to restore confidence.

“This restores investor confidence, mitigates sovereign risk, and secures systemic liquidity for the banking sector,” BAZ said.

No issue has generated more tension between government and business than the IMTT—now applied on both US dollar and ZiG transactions. ZANU-PF supporters are pushing for reductions ahead of the 2028 elections. Businesses want it removed. Treasury wants to retain it.

Economist Titus Mukove described the dilemma as a “tightrope.”

“In Bulawayo, the minister gave a hint that he might not remove the IMTT tax, but the business fraternity still feels that it needs to be reduced, possibly by half,” Mukove said.

Economist Malone Gwadu said tax realignment is long overdue.

“The need to make the IMTT tax deductible for corporate tax considerations ought to be heard… At the core of tax efficiency is to avoid double taxation,” he said.

CZI was more blunt, calling for full removal of the tax.

“While IMTT has provided a short-term revenue source, its cumulative impact on formal entities… is now making conditions increasingly difficult for production, investment and competitiveness,” the group said.
“Government should remove it in this budget cycle.”

Banks agreed.

“We are calling for significant reduction or removal of taxes on digital transactions… Its removal incentivises formal banking, expands the taxable base and reduces cash-based informality,” BAZ said.

With 74% of the economy now informal, Zimbabwe’s tax base is shrinking dangerously. Economist Enoch Rukarwa said the budget must address the crisis of informality.

“As informalisation increases, revenue collections decrease,” he said.
“The budget should create mechanisms that ensure the informal sector is incentivised to formalise.”

Rukarwa added that persistent liquidity shortages and layers of fees and levies have made compliance increasingly costly.

“The Minister should look at ways to reduce the burden of regulatory compliance, especially fees and taxes charged by regulatory bodies,” he said.

Mukove noted that although macroeconomic conditions have stabilised, structural transformation has lagged.

“There isn’t much to expect… except a lot of talk on the transition from NDS1 to NDS2,” he said.
“Now what we need is to push production and productivity, especially in manufacturing, and incorporate technology and AI to be competitive internationally.”

Gwadu urged Ncube to maintain strict fiscal discipline.

“There is a need to further entrench budget discipline by ensuring cash budget and doing away with any inflationary spending… This will help guard the already realised stability,” he said.

The 2026 budget represents the final phase of the National Development Strategy 1 (NDS1) and the bridge into NDS2, which government says will steer Zimbabwe toward upper-middle-income status by 2030. It aligns with the UN Sustainable Development Goals and AU Agenda 2063.

Treasury has pledged to maintain the zero-central-bank-financing rule and keep the deficit below 3% of GDP, with borrowing restricted to revenue-generating capital projects.

Recently, Ncube underscored that stability will remain the anchor of his fiscal approach.

“The foundation of this budget is stability, fiscal, monetary and macro-economic stability… We are maintaining strict fiscal discipline and the zero-central-bank-financing stance because it is essential for confidence in the local currency and the broader economy,” he said.

Ncube projects 5% GDP growth in 2026, supported by normal rainfall, improved power supply, moderate commodity prices and a stable exchange rate.

“Our aim is to keep the deficit below 3% of GDP… ensuring we do not crowd out the private sector while protecting resources for programmes that stimulate production and support vulnerable groups,” he said.

Today’s budget is more than a fiscal document, it is a credibility test for a government seeking to restore investor trust, unlock external financing and steer an economy battered by two decades of volatility.