financial crisis

Zimbabwe's government recently announced a partial dollarization, declaring the U.S dollar and other foreign currencies as legal tender alongside the Zimbabwean dollar in its efforts to fight a crippling hyper-inflation (after announcing the launch of a 100 trillion Zimbabwean dollar note in January). This measure could make remittance transfers more visible.  These have been often sent through unofficial channels so far, the result of a large parallel market premium since the official exchange rate has lagged behind the parallel market rate.

The UN news agency IRIN reports that the long queues that used to form outside exchange bureaus (often for exchanging foreign currencies that were hand-carried and sent by other means by migrants into the country) have now shifted to the banks where formal money transfers are processed.

The ongoing economic and political crisis in Zimbabwe has caused GDP to collapse by more than 50 percent, inflation to reach 231 million percent in July 2008, and the share of people living in poverty to increase to more than 80 percent of the population. Remittances to Zimbabwe from its 3 million emigrants (a quarter of the population) who fled the crisis are estimated to be between $360 million to $1 billion annually—the actual figure is likely to be even higher. These flows may have helped to stave off a complete collapse of the country and even more misery for the poor.  
 
Some questions to consider:

Chinese President Hu Jintao will visit Mali, Senegal, Tanzania and Mauritius this month to discuss a series of measures to help African countries cushion the impact of the global financial crisis.

Over the past decade, China has been consolidating its economic relationship with various African countries.  Given the crisis, I thnk it would be interesting to discuss if China will maintain its aid, trade, investment and migration flows to Sub-Saharan Africa and if there will be opportunities for new innovative financing mechanisms.

In her recent book, "Dead Aid," Dambisa Moyo mentioned that “if you start to look towards China for example, which has $4 trillion of reserves, all of a sudden you could see there might be another opportunity to do a bond issue in the Chinese market." 

Some recent developments on this front: 

Contributions also made by Sanket

Earlier this week, several countries reported monthly data for December 2008. As shown in figure 1, these data are in line with our expectations for 2008 (outlined in Migration and Development Brief 8). For five Latin American countries together, remittances have remained almost flat. The growth of remittances to all nine countries in figure 1 taken together is exactly the same as that estimated in the brief (19.7 percent versus 20 percent).

Figure 1: Growth of remittances in 2008 for countries that report monthly data

* Actual data for Philippines and Kenya for January-November 2008; Dominican Republic for Jan-September 2008, and staff estimates for remaining months.
Source: Central banks of the respective countries and DECPG Migration and Remittances team.