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Zimbabwe Pushes For Diaspora Bonds: Remittances Are No. 2 Source Of Liquidity

Zimbabwe Pushes For Diaspora Bonds: Remittances Are No. 2 Source Of Liquidity

From NewsdzeZimbabwe.

Diaspora remittances are now the second largest source of liquidity in Zimbabwe after exports, reaching US$830 million in the first half of 2016.

In June, diaspora remittances were pegged at US$157 million and there are estimates that they will reach US$1.5 billion by the end of 2016.

The government is exploring issuing diaspora bonds to entice the diaspora community to inject more money into the economy.

“From January to June we have received US$830 million diaspora remittances and this includes those coming through non­governmental organisations, which have contributed about US$440 million,” said Kupukile Mlambo, deputy governor of the Reserve Bank of
Zimbabwe, in a Zimbabwe Independent interview.

Official diaspora remittances grew from US$300 million in 2009 to more than US$800 million in 2014. In 2015, remittances from the diaspora were US$935 million — more than Zimbabwe gets through foreign direct investment (FDI).

FDI inflows tumbled from $545 million in 2014 to $421 million in 2015 — a 23 percent drop. The country struggles to attract meaningful investment due to policy inconsistency surrounding indigenisation and high levels of corruption.

The government will engage Zimbabweans living abroad to raise funds, according to the Economic Development in Africa Report 2016, launched Friday by Desire Sibanda, permanent secretary of Macro ­Economic Planning and Investment Promotion.

“The RBZ governor John Mangudya is set to meet with the diaspora community in the U.K. to explain and convince Zimbabweans in that country to invest in their country through diaspora bonds,” Sibanda said.

“Diaspora bonds are very important for our economy and we are very happy that the national diaspora policy pushed by our ministry was recently approved by cabinet so that we can engage our diaspora community.”

Mangudya’s trip will clarify to the diaspora community that when they invest their money in foreign currency, they will be paid back in foreign currency and not in bond notes.

“Engaging the diaspora community is meant to create confidence in Zimbabwe and assure those Zimbabweans out of the country that diaspora bonds will also work in their favor,” Sibanda said.

An estimated 2 million Zimbabweans are living abroad, with the majority in South Africa and the U.K.

A large share of diaspora savings are held in bank deposits, Sibanda said. “Deposits held in host ­country banks currently receive near -zero interest rates therefore migrant workers may find it attractive to invest their savings in other outlets or vehicles such as diaspora bonds,” he said.

Read more at NewsdzeZimbabwe.