‘Zim can sustain forex requirements’

Reserve Bank of Zimbabwe Governor Dr John Mangudya

The Reserve Bank of Zimbabwe (RBZ) says the country has adequate capacity to meet its monthly foreign currency requirements.

According to central bank figures, Zimbabwe requires US$100 million a month for industry and critical imports such as fuel.

Addressing the Parliamentary Portfolio Committee on Budget and Finance yesterday, RBZ Governor Dr John Mangudya, said Diaspora remittances and free funds available in the country alone can meet the country’s forex needs.

And that is without factoring in some export receipts.

“Our Diaspora remittances and free funds reach at least US$100 million a month; the economy needs US$100 million a month. If we harness this money, even without factoring in some exports, we will have sufficient forex for the economy,” he said.

Last year, Zimbabwe received US$635 million in remittances, representing a 2,6 percent increase from US$619,25 million in 2018.

‘Free funds’ – foreign currency received by individuals, international organisations, non-governmental organisations (NGOs) and embassies — were relaxed as to be allowed wider use by the general public in March.

And in a move aimed at oiling the market with forex, the RBZ said corporates receiving free funds from domestic transactions were allowed to use the funds for their own use either for foreign or for domestic payments.

This came on the back of the promulgation of Statutory Instrument 85 of 2020, which legalised the use of foreign currency for domestic transactions at a fixed exchange rate of 25 local dollars for every United States dollar.

Observers have, however, warned that due to the impact of the Covid-19 pandemic, Diaspora remittances might wane this year.

The Zimbabwe Coalition on Debt and Development (ZIMCODD), in a recent paper titled “Zimbabwe Covid-19 Response Mechanism: The Resource Factor”, projected a drop in remittances by Zimbabweans in the Diaspora due to a broader economic downturn attributable to Covid-19.

“With South Africa being the biggest host nation to Zimbabwe’s Diaspora population and accounting for over 56 percent of remittances, the restrictions in terms of movement of goods and the disruption to business will have negative effects to the majority of ordinary Zimbabweans,” said ZIMCODD in the paper.

“Consequently, the expected decline in Diaspora remittances has a net effect on the country’s current acute foreign currency challenges.

“A decline in individual cash remittances is also going to affect small-to-medium-scale businesses in retail, hardware as the remittances form a primary source market for these back of the value chain businesses.”

Meanwhile, the RBZ governor told the Parliamentary Committee that there is no rationality in the jump in the parallel market rate, which is estimated to be around 60 to the US dollar, saying the black market continues to persist because people are jobless.

“There is need for the country to boost production and therefore job creation. The black market is now an industry as people are jobless. A few transactions on the black market can easily push the parallel market rate. The official rate remains at 25,” said Dr Mangudya.

“The parallel market rate is going up because forex dealers have been active during the lockdown, especially through mobile money transactions, which is one of the reason why we moved to block suspicious mobile agent lines. We have nothing against the mobile money operators.”

The RBZ and Econet Wireless — one of the mobile telecommunications operators — are currently in a legal dispute over the move by the former to freeze agent lines.

Some observers say some businesses offering services to Government during this lockdown period also needed to be kept on check because some of them were also emptying their local dollar payments onto the black market.