Incentives for diaspora money

THE Reserve Bank of Zimbabwe (RBZ) has stepped up efforts to improve liquidity in the country by introducing an incentive scheme at a level of between 2,5 percent and five percent for diaspora remittances coming through the formal system.

This follows concern by the Government that diaspora remittances in the first half of the year declined by 13 percent to $397,3 million compared to $457,9 million received during the corresponding period in 2015.

Diaspora remittances are a major source of liquidity in the country after exports.

Presenting the Mid-Term Monetary Policy Statement yesterday, RBZ Governor Dr John Mangudya said:

“In view of the critical role of Diaspora remittances in the economy and in order to enhance the remittance of such funds, the bank shall be extending the export incentive scheme at a level of between 2.5 and five percent to diaspora remittances including any form of private unrequited transfers on funds remitted to Zimbabwe through normal banking channels with effect from 1st October 2016.”

The decline in diaspora remittances has been attributed to rapid currency depreciation in source markets against the United States dollar.

“The continued appreciation of the US$ against regional currencies has also affected the dollar denominated value of remittance inflows, particularly from South Africa, which have over the years been a significant source of foreign currency in the country.

“The weakening of the South African rand against the US$, imply that Zimbabweans who are in South Africa are no longer in a position to send the same amount of money in US$ they used to remit back home. The rand value remittances have gone down in US$ terms,” said Dr Mangudya.

Since the liberalisation of the economy in February 2009, the economy has been faced with liquidity crunch and this has had a knock-on effect in stimulating productivity in the manufacturing sector.

And part of measures to harness Diaspora remittances through the formal system, the Government had by December 2015, licensed 34 money transfer agencies.

While presenting the mid-term fiscal policy statement last week, Finance and Economic Development Minister Patrick Chinamasa pointed out that the Government would expedite the implementation of the National Diaspora Policy to promote the flow of funds through the formal financial system

It is feared that the anticipated decline in diaspora remittances beyond 2016 is likely to exert pressure on the country’s balance of payments. — @okazunga