HomeLocal NewsUS$2 billion externalised

US$2 billion externalised

THE Reserve Bank of Zimbabwe (RBZ) has announced stringent measures which include capping cash withdrawals without one-day prior notice to US$10 000, restrictions on offshore investment and suspending free funds to tackle illicit money flows and capital flight remittances after nearly US$2 billion evaporated from the capital-starved economy through externalisation last year.

Bernard Mpofu/Fidelity Mhlanga

Low aggregate demand, deflationary pressures and low foreign direct inflows are some of the factors compounding the liquidity situation, thereby retarding economic growth.

RBZ Governor John Mangudya
RBZ Governor John Mangudya

Announcing the Monetary Policy Statement (MPS) in the capital yesterday, RBZ governor John Mangudya said the apex bank would implement prudential measures, which will come into force today to mitigate illicit financial flows currently hemorrhaging the economy.

He said out of the US$1,8 billion externalised in 2015, US$1,2 billion was siphoned out by corporates with outward individual remittances accounting for the balance. He added that government will operationalise an economic crimes court to plug revenue leakage.

“Bank statistics show that during the period January to December 2015, a total of US$684 million was remitted outside Zimbabwe or externalised by individuals under the auspices of free funds for various dubious and unwarranted purposes that include remittance of donations to oneself, offshore investments, externalisation of export sales proceeds by corporates through individual accounts leading to pervasive tax evasion and externalisation. This rampant export of liquidity is not sustainable,” said Mangudya.

“We are drawing a line in the sand. Those who have done it before, please do not do it again. We have a list of those people, some taking more than US$10 million and take advantage of the laxity of the system to do that.”

The central bank also ordered all financial institutions to report all suspicious outgoing transactions before processing them to plug the rampant revenue leakages.

“Banks should promote the use of plastic money and bank transfers to minimise the unnecessary burden on consumers of carrying and paying in cash,” Mangudya said.

“Each person, subject to the jurisdiction of the Zimbabwean financial system, having an interest in or has authority over one or more financial accounts or securities or investments in a foreign country should report, through normal banking channels, to RBZ if the aggregate value of such accounts or securities at any point in a calendar year exceeds US$10 000. Going forward, any offshore investments would require prior Bank approval.”

Despite being endowed with an estimated 20% of industrial diamonds reserves in the world, Zimbabwe continues to face acute liquidity constraints.

The RBZ said due to the underperforming diamond sector, all the diamond export proceeds by Zimbabwe Consolidated Diamond Company would be accounted for by the central bank to improve transparency and accountability.

The apex bank is also seeking US$30 million to capitalise the diamond company.

“The Bank is deeply concerned about the failure of the diamond subsector to contribute to meaningful development of the economy like what happens in other regional countries where diamonds revenue contributes up to 30% of fiscal revenue. Unlike gold and tobacco which have significantly contributed to the liquidity in the economy, diamonds have been a great disappointment,” Mangudya said.

The central bank governor said the country’s financial services sector remained safe and sound, adding that banks should lower interest penalties on productive sectors.

In 2015 banking sector deposits went up by 11, 2% to US$5,6 billion with non-performing loans dropping from 14,5% as at June 30 to 10,9% by December as Zimbabwe Asset Management Company set up by the central bank continue to absorb the bad loans .

Mangudya said lending interest rates at some banks remain high and unsustainable when the default interest rates and other ancillary charges are levied.

Current penalty rates ranging between 20 to 35% were against economic transformation.

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