Govt taps into remittances to ease forex shortages

Recent measures by Zimbabwe to attract much-needed foreign currency has paid off, as the central bank announced earnings this week of Zim $520 billion (about US $100 million), mainly from remittances sent by Zimbabweans living abroad. Since the registration of 11 money transfer agencies (MTAs) five weeks ago, thousands of Zimbabweans, both locals and those in the diaspora, have flocked to convert their foreign currency. "There is an improvement in foreign currency inflows into the country since the implementation of the new policy allowing citizens to use Reserve Bank of Zimbabwe [RBZ] accredited money transfer agencies and the adoption of currency auction floor exchange rates," the RBZ said in a statement. Zimbabwe has faced foreign currency shortages as a result of its poor export performance and withdrawal of financial support by Western donors and some international financial institutions. The move to harness foreign currency from Zimbabweans living overseas, dubbed "Homelink", was a direct response from the government to undercut the parallel market which until now had reaped the bulk of inflows. The RBZ realised that the 3.4 million Zimbabweans living overseas were sending home significant amounts of hard currency. But, given the unfavourable rates at which foreign exchange was traded officially, hardly any of this money arrived through conventional banking channels. Under the Homelink scheme, Zimbabweans in the diaspora are offered a special exchange rate to entice them away from the parallel market. "As an incentive for Zimbabweans in the diaspora to send money home, the central bank has waived the charging of commissions by money transfer agencies," RBZ governor Gideon Gono said in a recent monetary policy review. "This means that for all foreign currency remittances made through this facility, beneficiaries in Zimbabwe will be paid the full amounts converted at the ruling auction rate or at the diaspora floor price of Zim $5,200/US dollar, which ever is higher," he explained. Recipients can also decide between getting the money in foreign or its local currency equivalent. Prior to the liberalisation, and faced with extreme foreign currency shortages, the authorities had imposed strict controls to govern the importation and use of foreign currency, and instructed all banks to demand proof of its origin. But earlier this year, the RBZ set up a team of financial experts to explore more creative ways of tapping into the foreign currency earnings of Zimbabweans abroad. It relaxed its stringent rules and directed all banks to stop asking questions about the origin of the foreign currency. In a controversial move last week, Gono even encouraged Zimbabweans to seek employment abroad. "The country's foreign currency reserves will improve significantly if more people went to work abroad. The exportation of labour has helped many countries in earning foreign currency as citizens use official channels to send money back to their families at home. I encourage Zimbabweans to seek jobs outside the country," he said. But Gono's suggestion has come under fire. The independent press was filled with letters questioning why the government wanted to enlist the help of expatriates to resolve an economic crisis critics accused the government of creating. Demonstrations against Homelink were held in the United Kingdom and the United States where RBZ marketing teams were heckled and labelled as fundraisers for the government. Zimbabwe's economic, and for some, political crisis, has fuelled the exodus of young men and women looking for better opportunities abroad.