Impact of Remittances on Vulnerability - Experiences from Zimbabwe

Summary of published paper¹

Days are spend queing for scarce fuel

It is often assumed in emergency needs assessments that increased remittances as a response to the crisis are beneficial to the recipient community. However, the paper below shows that analysis may need to be more sophisticated in determining who truly benefits from this source of income. (Ed)

Based largely on a review of evidence from Zimbabwe, a recent study on remittances shows that while money sent from the 'other side' has a beneficial effect on close kin, remittances can also undermine the purchasing power of those households without migrating members. This is partly a result of asset price inflation and partly due to the inflationary effects of parallel currency markets. The situation for those excluded from benefiting from foreign currency inputs is aggravated by chronic scarcity in the availability of consumable goods.

In the current period of economic decline since 1998, two new types of movement have become socially and economically significant in Zimbabwe. The first new pattern is a recent rapid growth in international trans-continental migration by the relatively privileged. The second is an increase in localised flight or distress migration (to South Africa, Botswana and Mozambique) associated with those farm workers who have lost livelihoods in the recent land reform. According to the Central Statistics Office Zimbabwe, over 539,000 Zimbabweans left the country during 2001, compared to nearly 375,000 in 2000.

Vehicle bought with remittances - but no fuel to go anywhere

Since many citizens are unwilling to deposit foreign exchange officially, economic management by government becomes compromised. Remittances, therefore, further widen the exchange spread, thus contributing to inflation and a requirement to raise interest rates. The rural and urban poor are particularly vulnerable since in a situation of inelastic supply for many staple goods, it is only those with international remittance monies who can afford increasing parallel market prices. The poor must instead rely on government fixed pricing schemes for insuring the supply of staples. However, increasing scarcity has spawned a parallel market even in basic goods. This market failure prompts the poor to seek concessional food from political patrons, which for many has meant (re)joining the ZANU-PF² to increase their chances of state subsidy. Thus, survival for the poorest has involved a reinvestment in political capital structures which some would have otherwise avoided in a 'freer' choice environment.

The author of the study argues that further research is required to understand the costs, as well as the benefits, of money sent home by migrants, in terms of assessing the class and social position of different groups of remittance senders and receivers.

¹Bracking, S (2003). Sending money home: Are remittances always beneficial to those who stay behind? Journal of International Development, volume 15, pp 633-644

²Zimbabwe African National Union Patriotic Front