BY FIDELITY MHLANGA
REMITTANCES from Zimbabweans living in the diaspora grew by 58% to US$1 billion last year, generating more foreign currency than gold and tobacco, the country’s top export commodities, according to data released by the central bank last week.
In a monetary policy statement issued on Thursday, Reserve Bank of Zimbabwe governor John Mangudya said remittances had totalled US$635 million the previous year.
This growth was registered despite concerns at the beginning of 2020 that blanket lockdowns rolled out by governments across the world to fight COVID-19 would throw millions of Zimbabweans living and working in the diaspora out of employment.
Many companies in advanced economies where Zimbabweans and other Africans worked were closed.
But some governments chipped in by taking over the payrolls of corporates to avoid potentially devastating bankruptcies, channelling over US$5,5 trillion to pay private sector salaries.
It was not clear if this was what helped maintain the flow of remittances into the country.
But it is possible that Zimbabweans resorted to their savings and continued sending funds to help millions who faced uncertainty back home after firm closures.
However, the central bank said monetary policy reforms also allowed the flow of remittances through the formal banking system.
In total, the country received US$6,3 billion last year, compared to US$5,5 billion in 2019.
“As at 31 December 2020, total international remittances amounted to US$1,7 billion, an increase of 43% from US$1,2 billion recorded during the same period in 2019,” the central bank chief said.
“In the year 2020, diaspora remittances amounted to US$1 billion, a 58% increase from the previous year of US$635,7 million. The increase in diaspora remittances is mainly due to liberalisation of the use of free funds in the country and improved channelling of remittances through formal channels.
“International remittances received through the normal banking system on behalf of international organisations amounted to US$647,8 million in year 2020, a 26% increase from previous year of US$519,4 million,” said Mangudya.
Diaspora remittances only trailed platinum earnings, which totalled US$1,77 billion in 2020.
Gold earnings in 2020 were US$994,7 million down from US$1,058 billion in 2019, while tobacco earned the country US$782,4 million during the period.
Economist Victor Bhoroma told NewsDay Business that diaspora remittances play a fundamental role in alleviating poverty in many households in Zimbabwe.
“Diaspora remittances are playing a key role in Zimbabwe in terms of alleviating poverty in many households. The fall in traditional income, high unemployment and starvation experienced in 2020 had left many households living in extreme poverty,” Bhoroma said.
“Remittances are also helping to boost domestic demand for consumer goods and other products and services such as real estate, building material and household furniture. That demand is sustaining the economy. Diaspora remittances are providing the much-needed forex into the formal and informal economy. The growth in foreign direct investment is caused by increased pleas for financial support from relatives locally due to income erosion.
Most remittances from the SADC region into Zimbabwe were through informal channels. The closure of borders rechannelled remittances back to the formal routes,” Bhoroma said.
It is estimated that three million Zimbabweans are living and working in the diaspora.
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