Remittances - govt hopes they can save economy

In a bid to boost foreign exchange reserves, the Zimbabwean government has attempted to persuade its citizens abroad to channel their remittances through formal transfer agencies. It is estimated that over the past five years, more than three million Zimbabweans have left the country in search of greener pastures - mostly to the United Kingdom, the United States, Canada, South Africa and Botswana - as the result of an economic crisis that has created record unemployment and inflation rates. A recent study by the International Organisation for Migration (IOM) on Zimbabwean expatriates in the UK and South Africa found that "nearly everyone maintained regular social contact with family members in Zimbabwe (96 percent)". IOM noted that "Around three-quarters of respondents (74 percent) sent economic remittances, and of those that sent these remittances, 85 percent said the main reason was to support family members." The money was more likely to be fowarded via "the informal routes of family, friends and personal visits to Zimbabwe than through formal financial institutions", the survey found. Clothes (85 percent) and food (43 percent) also ranked high as non-monetary gifts sent home. Eighteen percent of respondents said they remitted on average US $565 per month from the UK and South Africa. Another 18 percent said they sent between $377 and $563. Thirty-seven percent were sending between $188 and $375 a month, while 27 percent remitted less than $188. Because these remittances were being transferred informally or via independent money brokers, rather than financial institutions, "they do not become part of the balance of payments and foreign exchange reserves" of Zimbabwe. [Expatriates an untapped development resource, IOM] Last year central bank governor Gideon Gono visited the US and UK, where he met with Zimbabwean expatriates in an effort to persuade them to remit their foreign currency through registered money transfer agencies (MTAs), using a scheme called Homelink. "The new money transfer system [Homelink] was put in place to facilitate the transfer of funds from Zimbabweans living abroad, many of whom want to send money home to help their families or to invest for when they eventually return home themselves," the reserve bank noted on its Homelink website. The MTAs are located all over the world, "although there is a greater choice in some [countries] than others", with the UK having the largest spread of transfer agencies due to the high number of Zimbabweans living there. When he became governor in December 2003, Gono acknowledged that there was a need to improve the foreign currency reserves after years of biting shortages precipitated by the withdrawal of financial support by the International Monetary Fund and the World Bank. The foreign currency sent from abroad through the Homelink scheme is not taxed in Zimbabwe and is payable to recipients at the official exchange rate, but those with foreign currency accounts can receive it in the form sent. Foreign currency coming in from remittances goes to the currency exchange, where it is auctioned, and then used by the buyers to import goods and essential raw materials. The central bank said there had been an overwhelming response from Zimbabweans abroad, resulting in an increase in foreign currency reserves. "Many people have been quick to take advantage of the new MTA system. Already, the Reserve Bank has received US $4.6 million from both bank and non-bank MTAs. There have been long queues, at money transfer agencies, of people wanting to receive money sent to them from abroad. There have been long queues, too, at banks, of people wanting to change their foreign currency into local currency," the reserve bank noted. Various service providers, such as construction and funeral insurance companies, "have expressed their desire to take advantage of the benefits inherent in the money transfer mechanism", the bank added. Saviour Munyoro of Harare, a 60-year-old pensioner, said, "My sons [a policeman and a former teacher in Zimbabwe] quit their jobs and went to the UK [in 2002] because they felt they could earn a better living there. Even though they complain that they work long hours and hardly have time to rest, I am happy that they regularly send the money they earn to me," he told IRIN. "We are in the process of starting a chain store in the central business district, while there is enough left for my wife and me," he said proudly. In October 2004 the Reserve Bank started a scheme to provide loans, in local currency, to Zimbabweans abroad to purchase or build houses. The loans could be serviced in foreign currency - a move analysts said was also meant to boost reserves. Since its launch, the Homelink Housing Development Scheme (HHDS) has received about 1,400 applications for loans from Zimbabwean expatriates. The official New Ziana agency quoted the chairman of HHDS, Herbert Nkala, as saying the scheme had set up a construction programme, which had resulted in 120 houses being built in Harare, while more projects would be opened nationwide. According to the local government ministry, the country had a national housing backlog of 1.5 million in 2004, although analysts believe the number of people in need of houses is much higher. Economist John Robertson acknowledged that ordinary Zimbabweans receiving money from the abroad were enjoying the benefits, but said the central bank was not getting as much as it had hoped. "When you consider remittances going to ordinary Zimbabweans, you would say they are benefiting. However, the same cannot be said about money going to the currency exchange, since the reserve bank is failing to capture enough foreign currency to boost its reserves," he commented. "When the programme started, there was an enthusiastic response from those living abroad, but that zeal has lessened. The main reason is that there is a huge gap between the official selling rate of forex and the parallel rate. It is important for the government to devalue the local currency, in order to narrow the gap between the two rates," Robertson told IRIN. The official exchange rate is currently Zim $6,200, while on the black market the US dollar is being sold for Zim $15,000. See IRIN's global overview: Remittances - money makes the world go round