RBZ readies to inject $300m export incentive facility

RBZ readies to inject $300m export incentive facility
Published: 12 November 2017 (949 Views)
The Reserve Bank of Zimbabwe (RBZ) is set to introduce a new $300 million export incentive facility at the end of this month, as it accelerates efforts of generating the much-needed foreign currency.

The $300 million facility, which will come in the form of bond notes, has been arranged by the African-Export Import Bank (Afreximbank).

This facility will take the bond notes in circulation to $500 million, after the Afreximbank supported the first $200 million facility which hit the market in November last year.

It is widely expected that the $300 million facility would not only spur exports and consequently generate more foreign currency, but also improve general liquidity in the country as ordinary depositors can withdraw the money once the RBZ releases it to banks.

The physical cash situation in the country is deteriorating, with some depositors especially pensioners — having begun to sleep in bank queues fancying their chances of withdrawing their money the following morning.

RBZ Governor Dr John Mangudya told our sister paper, Business Weekly that the intervention is in tandem with the central bank's drive to grow the production base, and diversify the export sector so as to reduce risks associated with over-reliance on a few export products.

Already, the RBZ has introduced a new 12,5 percent incentive for industrial exports to expand the country's foreign currency earnings base.

In addition, the Afreximbank has also availed an enhanced nostro stabilisation facility of $600 million to help banks process foreign payments that are now impacting on industry's production capacity.

The change of narrative towards exports is essential in order for the country to focus on foreign exchange generation as the critical missing link that requires policy interventions to re-balance the economy.

Said Dr Mangudya: "We are in the final stage of the $200 million export incentive scheme and as soon as it expires, we will release another $300 million into the market.

"We expect the new facility to start working by this month-end. The new export incentive will be a continuation as there shall be no gap to say we wait for days to release the new bonus incentives."

The RBZ says at the moment, there is $1 billion in circulation made up of bond coins ($25 million), bond notes ($195 million) and multiple currencies dominated by the US dollar ($800 million).

Dr Mangudya believes that $1 billion is sufficient to support the usable bank balances as measured by the RTGS balances, currently sitting at around $1,6 billion in the banking system.

However, the central bank chief is worried that the bulk of the cash is not making its way back to the formal banking sector.

The parallel market holds the bulk of the money, which is being sold at a premium.

"We need to be disciplined in the utilisation of foreign currency. "Money has to circulate and in that way, we can unlock value from this economy. Our economy can be transformed through fiscal discipline.

"We need to bank our money so that it can circulate in the formal market. We are having these problems because most retailers and businesspeople are not banking their money," said Dr Mangudya.

Several businesses have been fined for not banking their daily takings. But despite the fines, other businesses remain defiant.

Turning to the 12,5 percent export incentive, Dr Mangudya said the new incentive for industrial exports has received the backing of economists who say the measure will boost exports.

Leading economist, Professor Ashok Chakravarti, who is also working with the Office of the President and Cabinet (OPC) in the various reforms pertaining to ease of doing business in the country, says the move by Dr Mangudya to introduce a 12,5 percent incentive for industry is "very commendable".

"The RBZ is taking various measures and has been quietly introducing measures without telling all of us. The Governor has recently introduced a 12,5 percent incentive for industrial exports which is very commendable.

"That will certainly make a difference to the declining trend in industrial exports although, of course, the private sector has to do more in terms of their own internal devaluation," said Prof Chakravarti.

In its Sub-Saharan Africa Regional Outlook, the International Monetary Fund (IMF) believes export diversification is central to generating more revenues.

Dr Mangudya says diversifying exports removes an over-dependence on a few products such as gold and diamonds, whose prices are not determined locally, but internationally.

This means when commodity prices decline, the country would be at risk, "so diversification is very critical".

"Export development is a must, more so, in a dollarised economy. "You need to earn foreign currency, you need forex for critical raw materials.

Therefore, earning forex is a must in an environment like this," said Dr Mangudya.


- sundaynews

Tags: RBZ, Export, Incentive,
 0

You May Like These Videos

Comments

There are no comments.

Latest stories

Chiwenga's illness due to witchcraft- prophet

by Stephen Jakes | 15 October 2018 | 31 Views

On our way to the river...

by Mthokozisi Gwizi | 15 October 2018 | 19 Views

United we stand, divided we fall

by Brightface Mutema | 15 October 2018 | 13 Views

Cars abandoned at garages

by Staff reporter | 15 October 2018 | 20 Views

Mudenda apologises to Sikhala

by Staff reporter | 15 October 2018 | 20 Views

MDC MPs begin Ninth Parly impressively

by Staff reporter | 15 October 2018 | 22 Views

Contraceptives prices shoot up

by Staff reporter | 15 October 2018 | 18 Views

'Tax pain must be shared'

by Staff reporter | 15 October 2018 | 15 Views

Tax war spills into court

by Staff reporter | 15 October 2018 | 13 Views

Moyo, Chamisa should work with councils

by Staff reporter | 15 October 2018 | 19 Views

'Tax those above PDL'

by Staff reporter | 15 October 2018 | 20 Views

Mnangagwa PhDs slammed

by Staff reporter | 15 October 2018 | 7 Views

Chamisa slams demo ban

by Staff reporter | 15 October 2018 | 14 Views

Chiwenga, Moyo hospitalised in SA

by Staff reporter | 15 October 2018 | 19 Views

Mnangagwa threatens foreign currency dealers

by Business Report | 15 October 2018 | 19 Views

Police brutality snaring the public

by Daniel Itai | 15 October 2018 | 14 Views

Mass stampede at Egodini: Anger, chaos and disappointment

by Divine Dube | 15 October 2018 | 17 Views

LIVE: Dynamos versus Caps United - Dembare fights relegation

by Staff reporter | 14 October 2018 | 155 Views

LIVE: Dembare will never die

by Staff reporter | 14 October 2018 | 158 Views

LIVE: Dynamos versus Caps United - Dembare fights relegation

by Staff reporter | 14 October 2018 | 126 Views

Why prices are going wild?

by Dr Masimba Mavaza | 14 October 2018 | 391 Views

'We will continue being the voice of reason' - MDC-T Khupe

by Linda Tsungirirai Masarira | 14 October 2018 | 272 Views

Clueless 'ED' needs exigent help…

by Knowledge Hakata | 14 October 2018 | 260 Views

Mthuli's illegal instrument must be jettisoned

by Jacob Mafume, MDC National Spokesperson | 14 October 2018 | 185 Views

Mnangagwa appointment discouraging

by Jacob Mafume, MDC National Spokesperson | 14 October 2018 | 199 Views

Mnangagwa targets black market

by Staff Reporter | 14 October 2018 | 265 Views

AFM divorce sealed

by Staff Reporter | 14 October 2018 | 219 Views

Warriors beat DRC

by Staff Reporter | 14 October 2018 | 198 Views

Zimra not considering charging duty in foreign currency

by Staff Reporter | 14 October 2018 | 148 Views

Mnangagwa, Putin set for key talks

by Staff Reporter | 14 October 2018 | 150 Views

'Mnangagwa empowers Zimbabwe'

by Stephen Jakes | 14 October 2018 | 141 Views

State of roads worsened up to year 2017- Minister Moyo

by Stephen Jakes | 14 October 2018 | 101 Views

Mwenezi doing well in agriculture though there is regular drought

by Stephen Jakes | 14 October 2018 | 52 Views

It's dangerous for schools to collect exam papers on day of writing

by Stephen Jakes | 14 October 2018 | 135 Views

Fuels situation to normalise this week

by Staff reporter | 14 October 2018 | 136 Views

EU gives Mnangagwa wider win margin

by Staff reporter | 14 October 2018 | 208 Views