DIASPORA remittances dropped by 15 percent in the first half of the year to $387,9 million due to rapid currency depreciation in source markets against the United States dollar.
The Government has since moved to expedite the implementation of the National Diaspora Policy to promote the flow of funds through the formal financial system.
Diaspora remittances are a major source of liquidity in the country after exports.
In his mid-term fiscal policy statement yesterday, Finance and Economic Development Minister Patrick Chinamasa said the use of informal transfers also contributed to the decline.
“During the first six months of 2016, Diaspora remittances amounted to $387,9 million, compared to $457,8 million received during the corresponding period in 2015.
“However, part of the decline might also be reflective of increased use of informal transfer channels,” he said.
As part of measures to harness Diaspora remittances, by December 2015, the Government had licensed 34 money transfer agencies.
The minister said the anticipated decline in Diaspora remittances beyond 2016 would exert pressure on the country’s balance of payments.
“It’s therefore, vital that we expedite the implementation of the National Diaspora Policy to provide an enabling framework that promotes the flow of the funds through the formal financial system,” he said.
Chinamasa noted that the private sector offshore external loans have been an internal integral source of liquidity in the economy since the adoption of a multicurrency system in February 2009.
The loans, he said, have largely been utilised for working capital and capitalisation.
“During the period from January to June 2016, the Reserve Bank of Zimbabwe approved and registered a total of 156 private sector loan facilities totalling $976,4 million. The agriculture sector has the highest contribution of 49 percent, which is mostly buoyed by the tobacco sector,” said the minister.
Chinamasa also said dependency on loan financing as opposed to equity financing to fund business investments was often symptomatic of investors’ mitigation of perceived unfavourable investment climate and risks.
“This is also true for investors who resort to using the Engineering Procurement Construction model as opposed to equity investment,” he said.