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Zimbabweans Overseas Use New System to Remit Money Home - 2004-06-03

Zimbabweans overseas are using a new system to send money through official channels to their families back home. The system is resulting in an increase in foreign currency reserves available for imports of food, fuel, and other necessities. This has not entirely killed the illegal parallel market in foreign currency.

Under a new arrangement known as Homelink, Zimbabweans living overseas can go to a specified agent and have funds transferred to their relatives in Zimbabwe. The recipients can collect the money in U.S. or Zimbabwean dollars at the official auction rate, now running at more than 5000 Zimbabwean dollars to one U.S. dollar.

That is close to the parallel-market rate. In the past, all official transactions had to be done at the rate of 824 Zimbabwe dollars, only about one-sixth of the market rate.

The initiative is the brainchild of Central Bank manager Gideon Gono, who was appointed last December. It involves the setting up of money transfer facilities in countries with a concentration of Zimbabweans who went abroad because of the economic problems back home.

In a report in the state-controlled daily newspaper The Herald, Mr. Gono is quoted as saying $16 million have come into the country under this initiative during the past two-and-a-half weeks.

The central bank has teams set up to meet with Zimbabweans abroad to try to convince them to use the new system. The teams are expected to visit Britain, South Africa, and Botswana, where millions of Zimbabweans live.

But the currency black market remains in business, in large part because it still offers exchange rates higher than the official one.

One dealer in foreign currency, speaking on condition of anonymity, says the fact that Zimbabweans may choose to receive their money in U.S. dollars benefits them because they can bring their money to the unofficial market with its more attractive rates.

Economist John Robertson says although the Central Bank initiative will increase the amount of money coming into the official system, it still is not a long-term solution.

Mr. Robertson says the continued existence of the parallel market is a clear indication that supply and demand will remain the determining factors. He says the real solution to Zimbabwe's foreign currency shortage lies in the recovery of the local economy.

Zimbabwe has been experiencing serious foreign currency shortages as a result of its worst economic crisis since independence. The unemployment rate is running at more than 70 percent, and inflation is more than 500 percent.