By Bernard Mpofu, HARARE, April 14 (The Source) – Zimbabwe has received nearly $34 billion in foreign currency receipts since the inception of the multi-currency system against national payments of about $36 billion over the same period with the informal non-bank system accounting for the deficit, the Reserve Bank has said.
The central bank says a gap of about $3,3 billion is financed from un-located domestic and foreign sources.
“This $3,3 billion between receipts and payments means that people have funds that they are keeping that is coming through informal channels that are not recorded by the Reserve Bank which they are using also to import and make payments,” Reserve Bank of Zimbabwe exchange control director Morris Mpofu told delegates attending an awareness workshop organized this week by the central bank in Harare.
After abandoning the local unit for the multi currency system, widely dominated by the United States dollar and South Africa’s rand in 2009, Treasury has relied on exports and remittances from its sizeable non-resident population to plug the country’s liquidity challenge.
The capital starved Southern African country has lagged regional peers in attracting FDI due to poor rankings on the ease of doing business and structural issues besetting the economy.
Official figures show that FDIs have been sagging with neighboring Zambia receiving $8 billion in FDI between 1980 and 2013, Mozambique ($16 billion) and Zimbabwe $1,8 billion.
Mpofu said the informal banking system accounts for $3,3 billion which plugs the deficit between foreign currency receipts and payments since 2009, confirming a widely held belief that billions of dollars could be circulating outside the formal banking system.
“Since 2009 to 2015 March, we have accounted for $34 billion in foreign currency receipts. For the six years and a quarter, the country has recorded has recorded and accounted for $34,4 billion of which 60 percent of that, which is $20 billion, are exports proceeds and 27 percent are diaspora remittances. Those are the two major foreign currency inflows into the market which are forming the liquidity that we have used,” Mpofu said.
“We have got a lot of work to do on the FDI and there is no way in a multi-currency environment where FDI is low and have financial stability. We need to increase our FDI so that it plays a very significant role.”
He said during the same period, payments have outstripped receipts, suggesting that many Zimbabweans living abroad have been remitting funds through the informal banking system.
Mpofu said a recent study by the central bank has shown that while Zimbabwe receives about $2 billion each year in disapora remittances, only $800 million is channeled to the formal banking system. Last April, the Reserve reintroduced authorised dealers with limited authority in a drive to reduce cost of remittances and tap foreign currency locked in the informal sector.
Projections indicate that remittances to developing countries likely grew by five percent to $435 billion from 2013 to 2014 and are seen rising further to $454 billion in 2015.
Sub-Saharan Africa is expected to experience exponential growth in remittances from 0.9 percent in 2012, to a pole position of 5.4 percent in 2017.
In Zimbabwe, remittances from the Diaspora amounted to $837 million in 2014, up from $790 million in 2013. Remittances account for about six percent of Zimbabwe’s 2014 Gross Domestic Product of $14 billion and about 23 percent of exports of $3,677 billion in 2014.
The country’s major source countries of remittances are South Africa, United Kingdom, Botswana, Canada and Australia.
Official figures show that about 88 percent of Zimbabwean diaspora are in South Africa and contribute about 33 percent of remittances.
Nearly nine percent of Zimbabwean diaspora is in the UK and contributes about 23 percent of remittances, the Reserve Bank said.
“On the payment side, the Reserve Bank exchange control has accounted for $36 billion since 2009, the advent of the multi currency system,” Mpofu said.
About 48 percent of the payments were funded from the domestic market while export proceeds contributed nearly 37 percent.
Domestic loans and free funds have accounted for four percent of the payments while three percent is from offshore loans that have been used to pay for imports, the central bank said.
The central bank also expressed concern over the underutilsation of loans approved by the apex bank saying this development does not improve the country’s liquidity situation.
“We have had about $40 billion in external loans approved by the Reserve Bank over the period 1994 to 2014. But we have only managed to utilize in those years about $15 billion which is almost 40 percent,” said Mpofu.
The Reserve Bank in its recent monetary policy statement said any approval by the central bank of a loan will have a life span of six months. Failure to utilize the loan would lead to the cancellation of the approval.