Extend fiscal incentives to diaspora investments: RBZ

THE Reserve Bank of Zimbabwe (RBZ) Monetary Policy Committee has underscored the need to leverage diaspora remittances for development as part of a broader package of measures geared at cushioning the economy from recurring global shocks.

International remittances, which comprise transfers by international organisations for humanitarian assistance and the Zimbabwean diaspora, are one of the critical sources of foreign exchange in the economy.

In an update following its recent meeting on December 1, RBZ governor Dr John Mangudya said the committee highlighted strong foreign currency generation capacity as evidenced by a 2,3 percent increase in foreign currency inflows to US$9,44 billion as at October 31 compared to US$9,23 billion generated during the same period in 2022.

Foreign Direct Investment

The committee said the foreign currency inflows have been supported by diaspora remittance flows, which have consistently surpassed Foreign Direct Investment (FDI), portfolio investment, and Official Development Assistance since 2009.

According to MPC, diaspora remittances alone contributed 16 percent of the country’s foreign currency inflows as at October 31.

“Thus, the MPC underscored the need to leverage diaspora remittances for development as part of a broader package of measures to cushion the economy from recurring global shocks,” said Dr Mangudya.

He said the committee recommend that the Government extends the fiscal and non-fiscal incentives for FDI to diaspora investments in the country, given the primacy of diaspora remittances in the economy.

In view of the prevailing macroeconomic environment, the MPC also resolved to maintain the current Bank Policy rate at 130 percent and the Medium-term Bank Accommodation Facility interest rate for the productive sectors, including individuals and MSMEs, at 75 percent, which rates will be reviewed in line with inflation developments from time to time.

The committee further noted that following the Government’s requirement in June this year for companies to settle an increased proportion of tax obligations on Quarterly Payment Dates (QPDs) in local currency created the much-needed demand for the local currency, which is critical in sustaining the exchange rate and inflation stability, it said the is need for Government to continue increasing the proportion of taxes settled in local currency to sustain the optimal mix of dual currencies.

-chronicles