Business Reporter
THE Reserve Bank of Zimbabwe (RBZ) Monetary Policy Committee (MPC) is pushing for incentives on diaspora remittances on the back of a bold commitment to stay the course of stability.
This follows the recent meeting of the MPC on December 1 2023 which deliberated on recent macroeconomic developments in the economy and the 2024 National Budget Statement present by the Honorable Minister of Finance and Investment Promotion on November 30 2023.
“Considering the prevailing macro-economic, the MPC recommend that the government extends the fiscal and non-fiscal incentives for FDI to Diaspora Investments in the country given the primacy of remittances in the economy.
“It was also resolved to maintain the current Bank Policy rate at 130% and the Medium term Bank Accommodation Facility interest rate for productive sectors, including individuals and MSMEs at 75% which rates will be reviewed in line with inflation developments from time to time,” RBZ governor Doctor John Mangudya said.
Zimbabwe’s diaspora community in South Africa and the United Kingdom accounted for the bulk of remittances last year, reaching US$1,66 billion up from US$1,43 billion in 2021, official figures show.
In 2022, total international remittances including from NGOs amounted to US$2,8 billion, which was an increase of 16% from the US$2,4 billion recorded in 2021.
“The foreign currency inflows have been supported by Diaspora remittances flows which have consistently surpassed Foreign Direct Investment (FDI) portfolio investment and official Development Assistance since 2009.
“Diaspora remittances alone contributed 16% of the country’s foreign currency inflows as at October 31 2023,” said Mangudya.
The MPC believe that International remittances, which comprise transfers by Zimbabweans in the diaspora and international organizations, are a critical source of liquidity in Zimbabwe’s economy with a positive impact on livelihoods across the country in the wake of exorbitant interest rates on the cost of borrowing abroad.
If properly harnessed, the foreign currency segment can serve as a lucrative source of capital to harness economic growth.
“Thus , then MPC underscored the need to leverage diasporas remittances for development as parts of the broader package of measures to cushion the economy from recurring global shocks,” he said.
The MPC also noted that the requirement by the government in June 2023 that companies should settle an increased proportion of tax obligations on quarterly payment dates (QPDs) in local currency created the much needed demand for the local currency , which is critical in sustaining exchange rate and inflation rate stability.
The MPC also underscored the need for government to continue increasing the proportion of taxes settled in local currency to sustain the optimal use of dual currencies.
Overall the MPC remained committed pursuing a tight monetary policy stance to safeguard the [
Prevailing macro-economic stability and ensure that inflation expectations remained anchored in the short to medium term.
