The Reserve Bank of Zimbabwe (RBZ) is in damage control mode following remarks made by Deputy Director William Mamhimanzi, which many interpreted as an indication that the RBZ and the government are seeking to compel recipients of Diaspora remittances to use the banking system and convert their funds into local currency at official rates. Currently, individuals receiving remittances from abroad can access their money in cash and hard currency. Authorities claim this practice fuels a persistent black market for foreign currency, undermining government efforts to regulate it.

Key Remarks by the Deputy Director

Mamhimanzi’s comments raised eyebrows:

“I think without a doubt we have a big informal sector in the economy. The question is obviously: where does the informal sector get its money from? So one big source of money is remittances, and these are some of the areas we need to work on. When somebody receives money from external sources, such as from relatives, they immediately get that money in hard currency. Once people get that hard currency in cash, you know it’s not going to go into a bank. It starts circulating outside. It goes into Mbare Musika to buy simbi (metal); it goes wherever. It doesn’t come back

The @ReserveBankZIM says it will be looking at how to keep foreign remittances in the bank. This could include forcing those who get money from their relatives in the diaspora to change it into local currency. – full submission #CapitalMarkets on this link… pic.twitter.com/VE0JjBt2c9
— HStvNews (@HStvNews) August 16, 2024

He emphasized the need to “tap that money” to ensure it remains within the banking system.

Government’s Ongoing Struggle with the Informal Sector

The government’s frustration with the informal sector is well-documented. The black market has thrived outside its control, undermining various policies. Despite numerous attempts to regulate it, these efforts have largely been unsuccessful. The drastic nature of Mamhimanzi’s suggestions has raised concerns about potential government policies, particularly given a prevailing sentiment that the government manipulates the official exchange rate to its advantage.

The Reality of Currency Exchange in Zimbabwe

The informal sector’s exclusion from accessing foreign currency through official channels has contributed to an artificially low exchange rate. This situation is compounded by widespread distrust in the banking sector, fueled by:

High bank charges that disproportionately affect customers.
An IMT tax levied on money transfers, which does not apply to cash transactions.
Frequent freezing of bank accounts for activities deemed illicit by the government.
Forced currency conversions at government-mandated rates during previous currency transitions.

RBZ’s Clarification on Remittance Policy

In response to the uproar, the RBZ quickly issued a statement clarifying that there are no plans to revise the current Diaspora Remittances Policy. The statement emphasized:

Diaspora remittances are treated as free funds, allowing recipients to receive money in foreign currency and exchange it as they prefer.
Remittances significantly contribute to the economy, accounting for 17% of total foreign currency receipts.
The RBZ is committed to exploring incentives to enhance remittance flows rather than hinder them.

Dr. John Mushayavanhu, RBZ Governor, reassured the public that recipients of diaspora remittances will not be forced to convert their funds at the point of collection or any other time.

Public Sentiment and Future Implications

While the RBZ’s clarification may provide some reassurance, many remain unsettled. The government’s track record of implementing surprise policies, including abrupt currency changes, leads to speculation about potential future shifts. The recent remarks by Mamhimanzi have left many wondering if this could be a precursor to more drastic measures regarding remittances.

For now, however, the immediate concerns appear to have been addressed, and the situation remains stable.