Business Weekly (Zimbabwe)

Remittance­s resolute despite inflation, currency volatility

- Business Writer

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.

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