Zimbabwe's People Kept Alive By Remittance Market

How does an economy keep going at all when inflation is currently running at 2m% and expected to reach 6m% by the end of June. Less than 10% of the population is employed and a huge food crisis looms ahead.

The answer is that the remittance market has been the lifeline for thousands in Zimbabwe.

A remittance company (identity withheld for security reasons) operating in Zimbabwe tells IAMTN that up to US$1.5m a day moves into the country in remittances. Western Union is the principal company but can only operate with the blessing of the Reserve Bank. The rest operate on the 'parallel' market, meaning the financial market running at the true value of the Zimbabwean dollar, rather than the declared Government rate of exchange, which today is running at 50% of the market rate.

The parallel market has been allowed informally by the Government to function being a useful source of badly needed foreign exchange. Remittance operators sell their foreign exchange to the Reserve Bank in exchange for Zimbabwe dollars at exceptionally good rates - in effect colluding with those who seek to destroy them.

Not surprisingly normal money transfer channels have suffered - as huge swathes of regular clients have moved to the unregulated systems. Apart from the fact they get a better rate of exchange, under the normal KYC rules they have also been fearful that their identities would be passed to the Government which at a time of intimidation and retribution could bring danger to themselves and their families.

As our source tells us this situation will continue until normal stability returns to Zimbabwe. A new government with international confidence would float the ZW dollar against the US dollar and overnight the whole structure of remittances and money transfers will change. It is expected that remittances would soar, through normal channels with funds being sent to rebuild the country.