RBZ readies to inject $300m export incentive facility

RBZ readies to inject $300m export incentive facility
Published: 12 November 2017 (708 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

Zimbabwean family leaves Bangkok after living at airport for 3 months

by Staff reporter | 23 January 2018 | 125 Views

Law maker on the run

by Simbarashe Sithole | 23 January 2018 | 132 Views

Sekeramayi preaches peace as he praises Mnangagwa

by Stephen Jakes | 23 January 2018 | 142 Views

MDC hypocrisy exposed

by Prosperity Mzila | 23 January 2018 | 102 Views

King Nadolo in a fix

by Staff reporter | 23 January 2018 | 79 Views

Trevor Dongo bashed again

by Staff reporter | 23 January 2018 | 69 Views

Olinda's dirty tricks!

by Staff reporter | 23 January 2018 | 86 Views

Dembare star still toothless

by Staff reporter | 23 January 2018 | 67 Views

Unrealistic expectations on the first hundred days of the president

by Dr Masimba Mavaza | 23 January 2018 | 128 Views

The tragedy of littering

by Clive Chiridza | 23 January 2018 | 80 Views

The Future of Gambling in Southern Africa

by Staff Reporter | 23 January 2018 | 68 Views

How's Zimbabwe's gaming scene compared to USA gaming scene?

by Staff Reporter | 23 January 2018 | 63 Views

Confusion as Zimbabwe promises review of elephant exports amidst global condemnation

by Adam Cruise and Christina Russo | 23 January 2018 | 70 Views

Financial scandal rocks Zimbabwe police

by Staff reporter | 23 January 2018 | 133 Views

Zesa workers demand 75% salary raise

by Staff reporter | 23 January 2018 | 113 Views

Duty on fuel reduced

by Staff reporter | 23 January 2018 | 102 Views

Chivayo deals: Heads to roll at Zesa

by Staff reporter | 23 January 2018 | 103 Views

Queen seeking to reconcile Britain with Zimbabwe

by Staff reporter | 23 January 2018 | 148 Views

Cop acquitted of Charamba insult

by Staff reporter | 23 January 2018 | 106 Views

Man loses $100,000 cash to robbers

by Staff reporter | 23 January 2018 | 127 Views

Chiefs' cars not vote-buying

by Nick Mangwana | 23 January 2018 | 81 Views

Zesa insolvent, expects increased loss

by Staff reporter | 23 January 2018 | 67 Views

2 new opposition parties unveiled

by Staff reporter | 23 January 2018 | 116 Views

No electric train for Bulawayo, but Mutare-Harare on cards

by Staff reporter | 23 January 2018 | 93 Views

Mnangagwa to name Zanu-PF's elections directorate

by Staff reporter | 23 January 2018 | 87 Views

Mzembi, Undenge back in court

by Staff reporter | 23 January 2018 | 65 Views

Merlin readies to resume production

by Staff reporter | 23 January 2018 | 93 Views

New war vets association on the cards

by Staff reporter | 23 January 2018 | 84 Views

Bus war kidnap drama

by Staff reporter | 23 January 2018 | 84 Views

D-day for Maphepha

by Staff reporter | 23 January 2018 | 77 Views

Charamba denies clips on social media

by Staff reporter | 23 January 2018 | 108 Views

Headmaster collapses, dies

by Staff reporter | 23 January 2018 | 215 Views

Scramble to meet Mnangagwa at World Economic Forum?

by Staff reporter | 23 January 2018 | 132 Views

'Zisco debt must be audited'

by Staff reporter | 23 January 2018 | 71 Views

Beitbridge border post ceiling collapses

by Staff reporter | 23 January 2018 | 43 Views

Heads to roll at Zesa

by Staff reporter | 23 January 2018 | 53 Views

Bulawayo Bomber to face Knife

by Staff reporter | 23 January 2018 | 96 Views

Midget poses as goblin

by Staff reporter | 23 January 2018 | 39 Views