Net foreign currency inflows surge

Published: 23 July 2018

ZIMBABWE'S net foreign currency inflows surged over 1 700 percent to $192,4 million in the first quarter, buoyed by tobacco earnings, latest central bank data indicates.

As Society for Worldwide InterBank Financial Telecommunications (SWIFT) foreign currency payments increased six percent to $970 million during the quarter ending March 31, 2018 from $920 million in the quarter to December 31, 2017, net forex inflows swelled, the Reserve Bank of Zimbabwe (RBZ) said.

"Net foreign currency inflows amounted to $192,4 million for the quarter ending March 31, 2018, up from a net inflow of $10,43 million recorded in the fourth quarter ending 31st December 2017," the central bank said in its first quarter report.

In the same period, SWIFT foreign currency receipts also increased by 25 percent to $1,17 billion as at March 31, 2018, from $930 million at the close of December 2017.

The surge in net foreign currency inflows, however, did not save Zimbabwe from its acute forex shortages, which have consequently resulted in the emergence of cash premiums on the back of US dollar scarcity.

The country - which uses a multi-currency system anchored on the greenback - has over $500 million in outstanding foreign payment obligations, with the RBZ rationing forex allocation to crucial imports.

As a result, local companies are forced to buy cash on the parallel market, driving up the country's cost of doing business, which is already high.

According to Fitch Group think-tank BMI, Zimbabwe's liquidity and foreign exchange crisis is set to persist until after the July 30 polls, with banks heavily exposed to political risk.

"We expect that the State will need multi-lateral support to manage demand and supply pressures. Commercial banks are heavily exposed to political risk.

"In the short run, the authorities will continue to rely on borrowing from domestic banks to finance a significant portion of the budget deficit, weighing on liquidity in the banking sector and economic growth at large," BMI's senior operational risk analyst Chiedza Madzima, said.

To date, the foreign currency shortages have seen investors failing to repatriate dividends.

President Emmerson Mnangagwa is on record admitting that "real money" will only come after the elections, urging Zimbabweans to be patient with his administration.

However, BMI sees meaningful re-engagement with multilateral institutions as the only solution to the country's foreign currency shortages.
- fingaz

Tags: Forex,