• Fri. Apr 19th, 2024

Government urged to adopt strong remittance policy

ByETimes

Feb 23, 2024

By ETimes

HARARE – Zimbabwe received remittances amounting to US$1,17 billion from the diaspora community in the first nine months of 2023, up 8 percent compared to the same period in 2022, latest data from the central bank show.

Diaspora remittances is money sent by a person in a foreign land to his or her home country and they have become one the biggest foreign currency sources for Zimbabwe after exports.

In the first nine months of 2023, diaspora remittances contributed 16 percent to the country’s total foreign currency receipts as exports accounted for 55 percent.

According to the World Bank’s latest Migration and Development Brief, remittances to low- and middle-income countries (LMICs) grew an estimated 3,8 percent in 2023, a moderation from the high gains of the previous two years.

In 2023, remittance flows to LMICs are estimated to have reached US$669 billion as resilient labour markets in advanced economies and Gulf Cooperation Council (GCC) countries continue supporting migrants’ ability to send money home.

“Remittances are one of the few sources of private external finance that are expected to continue to grow in the coming decade. They must be leveraged for private capital mobilization to support development finance, especially via diaspora bonds,” said Dilip Ratha, lead economist and lead author of the World Bank report.

“Remittance flows to developing countries have surpassed the sum of foreign direct investment and official development assistance in recent years, and the gap is increasing.”

Several African countries have implemented successful diaspora investment and entrepreneurship plans, leveraging remittance inflows to drive economic development and growth and experts say government should adopt such policies.

Economist Gladys Shumbambiri-Mutsopotsi said Nigeria has one of the largest diaspora populations in Africa, and the government has actively engaged with its diaspora community to promote investment and entrepreneurship.

“The country established the Nigerian Diaspora Investment Summit (NDIS) to facilitate dialogue and collaboration between the government, diaspora investors, and local businesses. Additionally, initiatives like the Nigerian Diaspora Direct Investment Summit (NDDIS) provide platforms for diaspora investors to explore investment opportunities in key sectors such as agriculture, real estate, and technology,” she said.

“Zimbabwe should do a similar board which deals with the diaspora community only and give them preference, not couple them to come through ZIDA like any other investor.”

According to economist Dr Prosper Chitambara, Kenya has implemented various programs to tap into the potential of its diaspora community for economic development.

“The Kenya Diaspora Policy provides a framework for engaging with the diaspora and leveraging their skills, expertise, and financial resources. The government has also established the Kenya Diaspora Investment Club (KDIC) to facilitate diaspora investments in priority sectors, including infrastructure, tourism, and renewable energy.

“Furthermore, initiatives like the Kenya Diaspora Homecoming Convention provide platforms for networking, knowledge exchange, and investment promotion, and surely our policy makers should leverage such parts of our society and push for development which is better than foreign direct investment,” he added.

Talk has been there up to government level to encourage diaspora investment and entrepreneurship as it is essential for channelling remittance funds into productive sectors of the economy.

Analyst Namatai Maeresera said Zimbabwe can implement strong and proven initiatives to stimulate investment and entrepreneurial activity.

“Creating dedicated investment vehicles or funds that pool remittance contributions from the diaspora community and allocate them towards strategic sectors such as agriculture, manufacturing, and infrastructure. As well as offering tax incentives, preferential loan terms, and regulatory support to incentivise remittance recipients and diaspora investors to allocate funds towards productive ventures with high developmental impact,” he said.

Maeresera also believes that developing entrepreneurship support programs, including business incubators, mentorship networks, and access to finance initiatives targeted at remittance recipients and aspiring entrepreneurs will help the country harness remittances.
However, the experts all agreed that in order for all this to work, there is need for a stable local currency in which one can store value in so that the country can leverage the foreign currency generated.

“Having our own currency is crucial for leveraging remittances because it provides us with greater control over monetary policy. With our own currency, we can manage exchange rates and liquidity in the economy to maximize the impact of remittance inflows.

“This allows us to stabilize the currency, control inflation, and stimulate economic growth through targeted interventions. Additionally, a sovereign currency gives us the flexibility to implement policies that support domestic industries and investments, ultimately driving sustainable development,” opined Dr. Chitambara.

Mutsopotsi-Shumbambiri added that our own currency empowers us to harness the full potential of remittances for economic development.

“It enables us to mitigate risks associated with exchange rate fluctuations and external dependencies. By having control over our monetary policy, we can strategically manage remittance inflows to stimulate investment, boost consumption, and promote entrepreneurship.

“Moreover, a sovereign currency fosters confidence and stability in the financial system, attracting both domestic and foreign investment. This creates a conducive environment for economic growth and prosperity,” she said.

Maeresera also added that the importance of having our own currency cannot be overstated when it comes to leveraging remittances for economic development.

“Our currency sovereignty allows us to tailor monetary policies to suit our specific economic needs, ensuring that remittance inflows contribute effectively to growth,” he said.

“By managing exchange rates and liquidity, we can optimize the impact of remittances on key sectors such as agriculture, manufacturing, and infrastructure. Furthermore, a sovereign currency enhances our resilience to external shocks and volatility in global financial markets, safeguarding our economic stability and sovereignty.”

By ETimes

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