BY STAFF WRITER
TIGHT restrictions on international travel imposed by governments to fight the Covid-19 scourge have closed off informal money transfer channels and boosted Zimbabwe’s official remittances last year, analysts said this week, as remittances rose 58% to US$ bn in 2020.
Zimbabwe received US$635,7m in remittances in 2019, according to Finance minister Mthuli Ncube.
Zimbabwe could be on track to surpass US$1bn after diasporans remitted US$746,9m during the first half of this year, compared to US$288,7m during the same period last year.
Economists predicted that remittances would reach US$1,3bn by December.
Ncube said last week diaspora remittances and other transfers, which constitute the secondary income account, are projected to continue driving the current account balance.
Personal transfers from the Zimbabweans diaspora are expected to remain steady and resilient as economies in source markets recover from Covid-19 induced slow-down, allowing them to invest in assets back home.
“Zimbabweans in diaspora have limited informal channels to use to remit monies back home where extreme poverty levels reached record levels of 50% in 2020,” economist Victor Bhoroma said.
“The Covid-19 lockdown is also limiting those who intend to travel back home and see their families and friends, as such those savings are directed via formal money transfer agencies. However, there has been a massive migration of skilled personnel from Zimbabwe to the diaspora in the past two years as a result of worsening working conditions and remuneration back home. The increase in the diaspora population also leads to incremental increase in the diaspora remittances.”
Bhoroma added that: “To incentivise formal remittances, the central bank needs to craft a policy allowing the Zimbabwean diaspora to benefit from interest rates on the deposits with local banks, to open savings accounts with banks back home with ease or get mortgages/loans at competitive interest rates. This will ensure the remittances are channelled to the formal sector and used to build domestic savings.”
Zimbabwe received the highest amount of remittances in southern Africa between 2018 and 2019, followed by South Africa, Madagascar and Lesotho, according to the African Development Bank.
Economist Takudzwa Chisango told businessdigest this week that the increase in diaspora remittances can be ascribed to increased dependency by locals on the diaspora community.
“It’s equally important to note that increased cross border money transfer platforms are also aiding this growth as they’re now wider options for one to choose, thereby improving the cost due to increased competition. According to the World Bank, the cost index of sending money from South Africa to Zimbabwe is relatively cheap at 14% compared to, for example, 19,6% (South Africa to Botswana) and 16% (South Africa to Malawi),” Chisango said.
He said increased investments by the Zimbabwean diaspora in the form of building houses and other household developments can partly be attributed to this surge in remittances.