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Zimbabwe's Central Bank Blames Offshore Accounts for Economic Decline

Zimbabwe’s central bank governor, John Mangudya, on Thursday blamed the sustained decline of the country’s economy on illicit cash flows, saying more than a billion dollars was externalized last year.

Presenting his 2016 Monetary Policy, Mangudya said some $684 million was exported to foreign accounts by individuals while companies externalized $1.2 billion.

Mr. Mangudya recommended the resuscitation of an economic crimes court to deal with all financial transgressions.

“Bank statistics show that during the period January to December 2015, a total of US$684 million was remitted outside Zimbabwe or externalized by individuals under the auspices of free funds for various dubious and unwarranted purposes.

“This rampant export of liquidity is not sustainable … In addition, US$1.2 billion export sales proceeds were externalized by firms. Circulating this liquidity within the national economy has a great multiplier effect and has a positive contribution to boosting aggregate demand.”

To plug the leakages, Mr. Mangudya said, citizens with offshore accounts holding more than $10,000 should now report them to the central bank.

“Each person, subject to the jurisdiction of the Zimbabwean financial system, having an interest in or has authority over one or more financial accounts or securities or investments in a foreign country should report, through normal banking channels, to RBZ if the aggregate value of such accounts or securities at any point in a calendar year exceeds US$10,000. Going forward, any offshore investments would require prior bank approval,” he said.

Mangudya also said starting Friday, customers should give their banks at least a day’s notice for cash withdrawals amounting to more than $10,000.

Despite the measures, economic analyst Masimba Kuchera told VOA as long as people have no confidence in Zimbabwe’s future and the safety of their accounts, they will continue holding funds in their foreign accounts.

“With lessons learned from the Zimbabwe dollar, people are now wary of banking locally, lest they lose their funds,” Kuchera said, adding that "as long as the uncertainty remains, cash leakages will continue.”

But another commentator, analyst Prosper Chitambara called the policy “sound.”