In the Monetary Policy Statement released by the RBZ on the 7th of February 2022 we found out that 2021 was a record breaking year. Foreign currency receipts in 2021 were up 53.5%, going from US$6.3bn in 2020 to US$9.7bn in 2021. A huge increase even when compared with our previous best year in 2013 where we recorded US$7.6 billion.
It is quite encouraging to see that all sources of foreign currency recorded growth in 2021.
Total Forex receipts
Foreign investment recorded the highest growth at 127.5%. This bodes well for us as it means foreign investors decided Zim was a more attractive destination in 2021. In terms of actual amounts, the increase in foreign investment was small, growing from US$40 million in 2020 to US$91 million in 2021. Still, this represents a positive.
The all important export proceeds recorded a 66.6% growth from 2020 amounts. This source of forex remains the most important to the country. This represents the productivity of our economy and the marketability of our products abroad. In absolute amounts, export proceeds increased from US$3.7bn to US$6.2bn, representing 64% of all forex receipts.
We have relied on diaspora remittances for years. Foreign based Zimbabweans tend to support the families they left behind and we saw a 42.7% growth in these remittances. An economy cannot be sustained by this kind of forex receipt. So, we should be celebrating that our reliance on remittances is falling a little every year as export proceeds grow. You will note that contribution of remittances to total receipts was 14.8% in 2021, down from 15.9% in 2020.
This is the right trend as the contribution was a high 28.6% just five years earlier in 2016.
The RBZ attributes the growth in total forex receipts to increased international commodity prices. This meant the value of our exports increased, hence the 66.6% growth there. The gold incentives that were put in place by the govt also led to an increase in gold delivered to the official market for export. These two factors, increase in output and increase in commodity prices led to the significant export proceeds growth.
Then diaspora remittances also grew significantly.
Whilst receipts grew by 53.5%, payments grew by 45.2%. Banks processed US$6.99 billion in payments in 2021 compared to receipts of US$9.69bn.
This led to an increase in foreign currency deposits in the formal banking sector. The average foreign currency deposits in 2021 thus grew to US$1.7 billion. Only downside is that banks are not lending this money out to help increase productivity in the economy. In defense of banks, they said they are waiting for a guarantee by the govt that should they lend this out, they will be able to collect in the same currency.
What did we spend the US$6.99 billion on? The major payments were:
- 24% on raw materials, pharmaceuticals and food
- 21% on capital goods
- 13% on intermediate goods
- 14% on fuel and electricity
I would like to see that 21% spent on capital goods grow in 2022.
The informal market
The figures discussed above do not take into account the informal market. The diaspora remittances figure gives the best indication of what happens on the black market. Although there is still a huge chunk of remittances that involve envelopes full of cash that are not captured in the official stats.
Payments are even harder to accurately capture with cash leaving beneath car seats and coming back as goods that sometimes evade the customs officers. This could mean extra forex leakages that are responsible for the constant forex shortages which lead to more premiums on forex.
With all that said, it is still encouraging to see that economic activity increased in 2021.