RBZ Relaxes Exchange Regulations

RBZ Relaxes Exchange Regulations

The Herald (Harare)
NEWS
May 1, 2006
Posted to the web May 1, 2006

By Jeffrey Gogo
Harare

EXPORTERS can now liquidate 100 percent of their foreign earnings at the ruling interbank exchange rate after the Reserve Bank of Zimbabwe (RBZ) last week relaxed exchange control regulations.

The central bank has, with immediate effect, abolished the sale of the 30 percent export receipts threshold at the official $30 000 against the United States dollar. Exporters can now sell that portion at the ruling interbank rate of $100 193 versus the greenback. This means that exporting firms can liquidate 100 percent of their foreign earnings using the interbank rate.

In a statement released to exporters last week, RBZ noted: "In order to further consolidate and support growth in the export sector, RBZ is pleased to advise the market that from 28th April 2006, the whole 30 percent portion currently being sold to the (central) bank shall be at the going interbank exchange rate. "Under the circumstances, this means that as per standing arrangements, exporters will continue to retain 70 percent in their FCAs, in line with existing exchange control rules and sell 30 percent at the going interbank exchange rate. "All exporters, therefore, now enjoy 100 percent conversion of th eir export receipts at the ruling interbank exchange rate." Previously, exporters were required to sell only 70 percent of their foreign earnings at the interbank rate while the remainder was disposed using the auction rate. Analysts say the new policy would greatly enhance exporter viability.

Exporters have persistently decried that exchange rate distortions had caused havoc in their businesses, as input costs failed to meet revenue. But the stability of the Zimbabwe dollar versus key foreign currencies over the last few months has worked in the interests of importers and holders of foreign currency-denominated debt. Financial analysts expect the dollar to remain stable against major currencies in the short term, although foreign currency shortages are likely to persist. However, what the new RBZ measure has done is to submerge exporter calls for devaluation, as well as addressing, to some extent, the disparities between input and output costs.

Zimbabwe continues to face fo reign currency challenges due to a combination of successive droughts, a declining export base and lack of balance of payments support from multilateral lending institutions. However, RBZ governor Dr Gideon Gono recently announced that the country would receive US$2,5 billion in cash and investments within the next three months.. This is one of the major targets under the New Economic Development Priority Programme (NEDPP) launched two weeks ago. Various efforts are also being pursued to ensure exporters bring in the much-needed hard currency.