Relax foreign exchange control on insurance: Think-tank


HARARE — THE Finance ministry should relax insurance regulations outlawing insurance companies from investing offshore in order to tap into capital from global financial markets, a top think tank has said.

The Zimbabwe Economic Policy and Analysis and Research Unit in its study on the financial sector said reforms in the insurance sector could help generate foreign currency.

The economy has in recent time been underperforming owing to liquidity constraints stemming from low exports and declining foreign direct investment.

Zimbabwe’s central bank figures show the country registered a meagre $67 million in foreign direct investment in the first half of 2014, down from $165 million over the same period last year.

“There is need to conclude the review of the restriction that forbids insurance and pension funds from investing offshore. The review has been going on since 2010. A certain percentage of their assets could be invested offshore for risk diversification, given limited favourable investment opportunities domestically,” Zeparu said in a report.

“Some of these companies are facing challenges in Zimbabwe. Under the prevailing economic conditions in Zimbabwe, allowing insurance and pension funds to invest offshore could further reduce liquidity in the economy.”

Experts say low uptake of prescribed assets also reflects an unattractive return on investment on the domestic market.

Short-term insurance companies are required to reserve five percent of their funds for prescribed assets while life assurance companies and pension funds are required to put up 7,5% and 10%, respectively.

– The Source