Economic analysts believe that despite the fact that Zimbabwe received improved foreign currency inflows estimated at over US$10 billion in 2022, this will have minimal impact on the economy and exchange rate due to the high demand for foreign currency within the economy.
The high demand for hard currency is a result of the economy which is now more dollarised, according to Business Weekly.
Diaspora remittances grew 15.9 per cent in 2022 to US$1.65 billion up from US$1.43 billion received in 2021. Diaspora remittances usually make up a sixth of the country’s foreign currency receipts and are the third largest foreign exchange earner after gold and platinum group metals (PGMS).
Economist, Vince Musewe, told Business Weekly that the improvement of foreign currency inflows is largely a result of the big conglomerates, tobacco farmers and other exporters. Musewe added:
Whether this will have an effect on the economy remains to be seen.
This is because liquidity shortages and elections are putting a damper on the economy. Therefore, we will not have significant confidence because the inflows have increased.
It is estimated that the monthly remittance flows from South Africa to Zimbabwe only, range between US$30 to US$60 million through both formal and informal channels and account for over 10 per cent of the country’s GDP according to the World Bank.
Gorden Moyo, Lupane State University lecturer and former State Enterprises and Parastatals Minister during the Government of National Unity, said the improved capital inflows are insignificant compared to the country’s financial obligations. He said:
There is not enough foreign currency for importing electricity and critical raw materials. The country does not even have enough foreign currency to service its debts and to build foreign currency reserves.
Moyo said both the Reserve Bank of Zimbabwe (RBZ) and the Government failed to prudently use the US$960 million Special Drawing Rights (SDRs) received from the International Monetary Fund (IMF) in 2021.
He added that authorities must curb illicit trade and illicit financial outflows “which far outweigh the inward bound capital flows.”
Between the years 2000 and 2020, Zimbabwe is estimated to have lost over US$32 billion through illicit financial flows.
Most of the illicit financial flows happen through profit shifting, mispricing, money laundering, and other financial delinquencies.