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ZIMBABWE: Remittances saved the country from collapse

20 Feb 2009 16:44:04 GMT
Source: IRIN

Background

• Zimbabwe crisis

• Zimbabwe hunger

HARARE, 20 February 2009 (IRIN) - The official sanctioning of foreign currency as legal tender in Zimbabwe to tackle hyperinflation is bringing into sharp relief how remittances have staved off the country's complete collapse in recent years.

Before Robert Mugabe's government officially endorsed foreign currency, long queues would form outside banking halls to exchange foreign bank notes for Zimbabwean dollars, but since the use of foreign currency has been permitted the queues have shifted to commercial banks, where money transfers are processed.

An executive at a commercial bank in the capital, Harare, who declined to be named, told IRIN that the bank had opened two additional counters specifically to deal with money transfers.

"We would not have survived these harsh times had it not been for our son and daughter in England," Zodwa Nyathi, 58, of Cowdray Park, a working-class city suburb, told IRIN as she waited in a queue outside a commercial bank. Both her son and daughter pursued tertiary education and decided to remain in the UK after they had completed their studies.

Money in the pocket

Foreign currency remittances from Zimbabweans living outside of the country - excluding hand-to-hand transfers - were expected to double in 2009 from an estimated US$361 million in 2008, according to projections by the International Fund for Agricultural Development, a UN agency dedicated to eradicating rural poverty.

Other estimates have put all remittances from expatriates in Britain to Zimbabwe at about US$1 billion annually.

"If this is true, it puts a new dimension on this issue - it shows that the actual Zimbabwe-origin population in the UK is much bigger than estimated, and that they are sending much more money home than we ever imagined," Eddie Cross, a prominent member of the Movement for Democratic Change (MDC), told IRIN.

"This would explain where all the foreign currency that keeps this country going, is coming from; it explains why many more people are not actually dying from the present crisis in terms of hunger, malnutrition and neglect."

About seven million of Zimbabwe's official population of 12 million, or more than half the people, are receiving food aid, although this does not factor in the millions thought to have left the country in recent years.

Dollarizing

Cross said the remittances explained the government policy of printing money, which fuelled hyperinflation and enabled the ruling ZANU-PF elite to access hard currency and fund their lifestyle.

Zimbabwe's central bank estimated in 2008 that locals were spending an estimated US$950 million annually on basic commodities in neighbouring states, a trend believed to have precipitated ZANU-PF's decision to dollarize after the local currency collapsed under the weight of hyperinflation, officially estimated in July 2008 at 231 million percent.

Steve Hanke, professor of applied economics at the Johns Hopkins University, Baltimore, US, and hyperinflation specialist, estimated inflation in Zimbabwe at 89.7 sextillion percent in November 2008.

It is thought that more than three million people - at least a quarter of the population - have left for neighbouring states and further afield to Britain, the US and Australia, to escape 94 percent unemployment, hyperinflation and a humanitarian crisis at home.

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