Zimbabweans stash $1 billion offshore

Zimbabweans stash $1 billion offshore
Published: 14 December 2017 (441 Views)
FUNDS held by Zimbabweans in offshore banks rose to US$1 billion last year, having declined to US$300 million four years ago, following escalating political risk and uncertainty at home, Reserve Bank of Zimbabwe (RBZ) deputy governor, Kupukile Mlambo, has disclosed.

This amount was exclusive of billions of United States dollars, now subject of a government ultimatum for repatriation, spirited into safe havens through foreign currency externalisation.

Mlambo, who reinforced the RBZ's warning that authorities must tackle the slide in confidence, said the funds held offshore by Zimbabweans reflected lack of confidence in the local economy.

Savings held by Zimbabweans in offshore banks were estimated at about US$800 million on dollarisation in 2009, the central bank deputy chief said.

During the period when the country's inflation rates dropped to less than one percent in 2009, from the record breaking levels of 500 billion percent in December 2008, Zimbabweans repatriated their savings back home after confidence had been restored by economic and political stability.

As a result, funds held in offshore accounts dropped to US$300 million in 2013, said Mlambo, noting that this was also in tandem with double digit economic growth achieved at the time.

He said by the end of last year, deposits in foreign accounts had crept back to about US$1 billion.

In his address to mining industry executives on Friday, Mlambo blamed mounting economic headwinds characterised by the banking sector fragility, as well as the painful liquidity crisis that has heightened fears of a return to the 2008 debilitating crisis.

"Everything comes down to confidence," Mlambo said in his comments at the launch of the 2017 State of the Mining Industry Survey report on Friday.

"If confidence returns on the market, foreign currency shortages will disappear. Bank queues worry us, but what we are facing is a shortage of foreign currency, not a shortage of cash. Our US dollar in Zimbabwe is (not) used for importing equipment, but it is also used for buying tomatoes on the roadside," he said.

"The amount of money held by Zimbabweans in foreign banks was about US$800 million in 2009. But by 2016, it had gone back to just under US$1billion. This was the time when we were beginning to have foreign currency shortages," he said.

The situation highlights the extent of the challenges that President Emmerson Mnangagwa's new administration faces.

The mining sector survey said while Mnangagwa's unexpected rise to power had helped calm market fears of a deteriorating economic and political crisis going into 2018, pockets of uncertainty remained.

The Chamber of Mines of Zimbabwe (CoMZ) called on the new administration to swiftly address risk factors to bolster the industry's recovery prospects.

Central bank authorities have refused to acknowledge that the banking system has been paralysed by lack of confidence.

But scenes of long queues at the doorsteps of every banking hall point to a deepening crisis.

Thousands of depositors, including pensioners, have had to sleep in banking queues countrywide to access their savings during a crisis that intensified at the end of 2016, and is also blamed on foreign currency externalisation.

Last year, the RBZ said about US$1,8 billion was being externalised every year, although other reports placed the figure at US$2,4 billion per annum.

Banking money offshore is equivalent to surrendering vital liquidity to the countries of recipient banks.

The US$700 million reported to have been moved offshore represents almost twice the US$392 million in fresh capital that the mining industry said it requires to stimulate exports and unlock the vital foreign currency to rebuild the economy.

Savings have virtually dried up and import cover which has deteriorated to perilous levels of less than a month was below the recommended three months, according to the International Monetary Fund.

This has placed the country at risk of failing to import vital requirements including fuel and medicine. Government has given individuals and organisations that have externalised foreign currency a three month window to return the funds or face prosecution.

But those who have not been able to open offshore accounts still prefer not to deposit their savings in banks but keep it at home.

This has fuelled the liquidity crisis, whose genesis can be traced to the 2007/2008 financial crisis.

When banks closed, savings were trapped inside, and people failed to access them.

- fingaz

Tags: RBZ, Forex, Mlambo,
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