Diasporan remittances boost economy

via Diasporan remittances boost economy | The Herald June 26, 2015

ZIMBABWE has received a cumulative $3,5 billion since 2009 from its nationals in the Diaspora who now account for about 25 percent of liquidity in the domestic economy, with authorities now working to optimise the inflows, a senior official said.

In fact, remittances from the Diaspora have outperformed inflows from portfolio ($1,08) billion) and foreign investments ($2 billion) during the five-year period (2009-2014), demonstrating availability of a huge liquidity pool Zimbabwe can exploit.

This comes as Government continues to explore ways to improve the liquidity situation in the economy amid low export performance, low investment and outside development assistance at a time the country suspended the local currency.

Reserve Bank of Zimbabwe Deputy Governor Dr Kupukile Mlambo told the Zimbabwe National Chamber of Commerce annual congress that ends in Victoria Falls today that Diaspora inflows have grown from $294 million in 2009 to $837 million. The congress was themed “Addressing competitiveness challenges in the emerging economy”.

The RBZ deputy Governor said remittances from the estimated 3,5 million Zimbabweans living in foreign countries could play a bigger role in easing the liquidity crisis and facilitating growth in the domestic economy, hamstrung by liquidity crisis.

“The largest part of our remittances come from South Africa (33 percent), United Kingdom (24 percent) and United States (7 percent) and you can see that about half of our remittances actually come from (only) two countries (SA and UK),” Dr Mlambo said.

Export proceeds, though still and by far short of the levels required to eliminate liquidity crisis, account for the biggest portion of inflows into Zimbabwe at 62 percent, followed by money transfers 25 percent, loans 6 percent and income receipts 4 percent.

“What this is telling us is that when we formulate policies to tap into the Diaspora we need to know where the Diaspora is located. We need to make policies that make it attractive for those people to remit money back to the country,” he said.

This comes against the background that the whole African continent received about $33 billion from the Diaspora, which points to the fact that considering the large number of Zimbabweans in foreign countries, more can be done to increase the inflows. But even the African continent itself, except for Kenya, South Africa and Uganda, is not doing as much as it should considering that remittances to the continent are small by global standards and increasing slowly, expanding by a mere 2 percent in 2914. The need for more effective policies to tap into the potentially large liquidity reservoir of the Diaspora comes against the backdrop were the country is losing billions of dollars through imports, in the end leaving a negative liquidity flow balance.

“Imports become an outflow of liquidity. As long as we continue to import more than we export we will continue to have negative net inflows we actually have negative liquidity flows in that relationship,” the central bank deputy governor said.

Further, efforts to increase inflows, which have no strings attached unlike loans and other forms of assistance, come against a situation where the cost of money transfer in Zimbabwe is apparently too high and prohibitive, Dr Mlambo told delegates.