Zimbabwe tightens controls on offshore investments after losing $1.8 billion

Zimbabwe today tightened controls on offshore investments to plug foreign currency leakages after the country lost $1.8 billion in illicit financial flows last year — over a third by individuals.

Zimbabwe is in the throes of a cash squeeze after abandoning its hyperinflation-ravaged local currency in 2009 and adopted mainly the US dollar whose supply is limited.

Presenting the Monetary Policy governor John Mangudya said foreign currency outflows were worsening the already critical liquidity in the economy.

RBZ records show that $684 million was externalized by individuals in 2015 for various for various purposes that include donations, investments and account transfers.

Firms externalized $1.2 billion in the form of export sales proceeds and highly inflated management fees, technical and professional fees.

“In order to guard against externalisation by related companies through service payments, management fees, technical fees, service fees or by whatever name they come under, shall not exceed an aggregate of 3 percent of revenue and shall require Bank approval,” said Mangudya.

“Individual and corporate investments offshore of more than $10 000 should be declared to authorities with any such investments in the future requiring Bank approval.”

Mangudya said despite the leakages the banking sector was in a sound state in 2015 with deposits going up 11.2 percent to $5.6 billion as at 31 December.

Non-performing loans went down from 14.5 percent as at June to 10.9 percent in December.

“This is largely attributable to the disposal of qualifying loans to ZAMCO and the effective credit risk management strategies employed by banks.

In order to increase liquidity and minimize payment gridlocks the central bank increased financial institutions’ nostro limits from five to 10 percent  of the bank’s total deposits.

Mangudya also said Zimbabwe will now allow foreign investors to buy stakes of up to 49 percent in companies listed on the Zimbabwe Stock Exchange from 40 percent previously to boost investment.

The southern Africa country’s economy is suffering from low growth and a devastating drought pressured by low commodity prices and a strong US dollar.

“We have also increased the threshold of foreign investors on the stock exchange from 40 percent to 49 percent in line with the indigenisation and economic empowerment policy,” said Mandudya.-The Source

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