Remittances resolute despite inflation, currency volatility
INTERNATIONAL remittances in the first quarter of 2022 reached a high of US$629,6 million as more Zimbabweans abroad continue to support families back home. In the period under review, remittances grew by 27 percent in comparison with the same period in 2021 that saw international remittances reach US$493,9 million.
Ministry of Finance and Economic Development Permanent Secretary, Dr George Guvamatanga, revealed this during a 7-year credit facility worth EUR12,5 million signing ceremony between the European Investment Bank (EIB) and First Capital Bank at Meikles Hotel this week.
Economic analyst, Tinevimbo Shava, commenting on the remittances said; “We expect this trend as the country has exported labour throughout the world in the previous six to seven months, meaning that the country might reach a new high on remittances this year.”
Statistics from the Reserve Bank of Zimbabwe show that diaspora remittances surged from about US$$1 billion in 2020 to US$1.4 billion in 2021 as the country hits record high foreign currency inflows of US$9.7 billion during that period.
Guvamatanga, however, acknowledged that the country was facing challenges with inflation and currency volatility.
“However, despite the increase in remittances, the country is facing challenges of rising inflation and local currency volatility, partly due to pass-through effects of global shocks,” he said.
Guvamatanga vowed that Treasury knows of these problems and they are going to deal with them, saying government is very much committed to address the current challenges in the economy.
The food supply is particularly at risk as the Russia – Ukraine war has disrupted crucial grain shipments from Ukraine and Russia and worsened a global fertiliser crunch that will mean costlier food.
The loss of affordable supplies of wheat and other grains raises the prospect of food shortages in African countries where millions rely on subsidised bread and cheap noodles.
Vegetable oil prices hit a record high in February, then increased another 23 percent in March, according to the U.N and Food and Agriculture Organisation. Soyabean oil, which sold for US$765 per tonne in 2019, was averaging US$1,957 per tonne in March, the World Bank said.
In the same manner of dealing with currency volatility, Treasury has moved to pay infrastructural contracts in a staggered manner as they try to avert the temptation to try and convert a solid local currency payment on the black market.
Minister of Finance and Economic Development, Professor Mthuli Ncube, during a post cabinet briefing said; “What is driving the exchange rate is speculative behaviour and some actions of monopolies that we have seen.
“We have two critical steps; one is to pay contractors using the following formula: 50 percent in US dollars and then 50 percent in Zimbabwe dollars.
“The second action is that on the Zimbabwean dollar portion, we spread it out. Not spread it out all at once, we spread it out in bits and pieces to make sure it doesn’t find its way as a lump sum into the parallel market.”
Mthuli said the Government had taken those actions and established a liquidity committee drawn from his ministry and the Reserve Bank of Zimbabwe to monitor and manage the liquidity of the entire economy.