The Sunday News
Simba Jemwa, Sunday News Reporter
DIASPORA remittances are expected to hit between US$1,5 billion and US$1,6 billion mark at year end up from US$1,4 billion last year, with transfer fees expected to be lowered from the current eight percent in spite of the removal of the two percent tax by Government.
This was revealed by the Minister of Finance and Economic Development, Professor Mthuli Ncube during a wide-ranging interview with Sunday News in Bulawayo yesterday.
Prof Ncube said the expected rise in remittances was due to increased diaspora support to locals, adding that his Ministry was looking at availing US$ Diaspora Bonds to enable Zimbabweans living abroad to invest their funds at fair interest rates.
“There has been steady increase in international remittances and we expect them to get to between US$1.5 and US$1,6 billion at year end up from US$1,4 billion last year. As results of these remittances my Ministry is considering availing US$ Diaspora Bonds to allow Zimbabweans living outside the country to invest their funds at fair interest rates. This will enable them to remit to family to Zimbabwe their interest while leaving their initial capital investment intact,” said Prof Ncube.
Locally, Prof Ncube said there has been a significant rise in domestic remittances but the increase is not being reflected in Treasury inflows because they are not giving Government its Intermediated Money Transfer Tax (IMMT) on time.
“These delays then force Government to borrow through instruments such as Treasury bills so that we can fund development projects currently underway. The delay in remitting taxes to Treasury by money transfer companies forces Government to borrow through such instruments as Treasury bills to fund development projects,” he said.
Prof Ncube said there has been substantial growth with the sector with many companies being licensed to operate which he attributed to an upturn in economic fortunes in the country. He expressed hope that this growth will translate into lower costs of moving money with current fees standing four percent for domestic transfers.
“I think current money transfer rates are too high and should decrease but this will be determined by competition within the industry which is growing at a phenomenal rate. Through the Reserve Bank of Zimbabwe (RBZ), we have been licensing more and more companies so in the medium to long term, the cost of moving money should decrease.”
A recent study showed that there has been a 30 percent increase in domestic transfers. However, that increase is not being reflected in Treasury inflows because they are not giving Government its Intermediated Money Transfer Tax (IMMT) on time.
“But the problem with remittances due to Treasury is not unique to money transfer companies alone. Even banks are guilty of this. Treasury through the Zimbabwe Revenue Authority (Zimra) is currently owed about US$6 million by banks in Value Added Tax remittances that they should pay to Zimra,” revealed Prof Ncube.
“My Ministry will soon begin to penalise them if they hold onto funds due to Treasury for longer than necessary. Proposed penalties will be twice what they should remit to Treasury if they delay,” revealed Prof Ncube.
He said delays were sometimes well over 90-days which puts a strain on Treasury funds and its financial commitments to Government business.
“The Second Republic is working towards a middle-income economy by the year 2030 through the National Development Strategy 1 (NDS-1) which President Mnangagwa has been championing through several programmes such as infrastructural development, roads, construction of bridges and schools among others. And all of these projects need to be funded.”
The Minister also spoke out against the rise in forex trading in the country, pointing out that it was illegal as it encouraged parallel market trade. He called on youths to avoid being sucked into it as it would lead to major financial losses.
“Young people need to understand that forex trading is not cut and dried as they think it is. I believe they should focus their efforts on learning about stocks trading instead. They will encounter big losses in forex trade because of the complexity of currency exchange market,” the Minister advised. — @RealSimbaJemwa