RBZ readies to inject $300m export incentive facility

RBZ readies to inject $300m export incentive facility
Published: 12 November 2017 (750 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,

You May Like These Videos


There are no comments.

Latest stories

A tale of three vice presidents

by Tondorindo Chinehasha | 23 February 2018 | 99 Views

Nust Graduate wins beauty pageant

by Jefferson Metha | 23 February 2018 | 50 Views

It's time for rural cemeteries

by Thomas Murisa | 23 February 2018 | 76 Views

Mugabe warned: Shut up!

by Stephen Jakes | 23 February 2018 | 415 Views

2017 O-Level pass rate down to 26.35%

by Ndou Paul | 23 February 2018 | 151 Views

The mystery of the missing MDC-T constitution

by Joe Devanny | 23 February 2018 | 96 Views

Khupe snubs Chamisa overture

by Staff reporter | 23 February 2018 | 204 Views

Mutambara warn MDC-T members

by Staff reporter | 23 February 2018 | 346 Views

Jonathan Moyo taunts 'hopeless charlatan'

by Staff reporter | 23 February 2018 | 220 Views

Cheated wife cuts off man's sex organs

by Punch.com | 23 February 2018 | 102 Views

Cheating man in juju scare

by Staff reporter | 23 February 2018 | 132 Views

Headmaster, wife demand $145,000 from school

by Staff reporter | 23 February 2018 | 111 Views

Woman faces $10 000 adultery lawsuit

by Staff reporter | 23 February 2018 | 78 Views

Chamisa salutes Mnangagwa's govt

by Staff reporter | 23 February 2018 | 138 Views

Chamisa blasts the police force

by Simbarashe Sithole | 23 February 2018 | 571 Views

The social media president

by Charles Munganasa | 23 February 2018 | 81 Views

Four incredible gambling stories

by Agencies | 23 February 2018 | 64 Views

Reckless behaviour cost lives - PDP

by Jacob Mafume | 23 February 2018 | 77 Views

Tapping into diaspora remittances for growth

by Victor Bhoroma | 23 February 2018 | 68 Views

Zimbabwe's pricing dilemma

by Victor Bhoroma | 23 February 2018 | 68 Views

Chamisa blast the police force

by Simbarashe Sithole | 23 February 2018 | 259 Views

MDC-T drama: We have learnt very little about the past 37 years

by Hopewell Chin'ono | 23 February 2018 | 108 Views

Grace Mugabe is being harrassed, says Mugabe

by Staff reporter | 23 February 2018 | 229 Views

Ramaphosa forgives Peter Ndoro for 'killing' him

by BBC | 23 February 2018 | 164 Views

South Sudan to hang former South African colonel

by BBC | 23 February 2018 | 128 Views

British couple kidnapped in South Africa

by AFP | 23 February 2018 | 107 Views

Zim revives fuel pipeline deal with Botswana

by Staff reporter | 23 February 2018 | 86 Views

Fresh row over command agriculture

by Staff reporter | 23 February 2018 | 86 Views

MDC-T succession war, violence and tribalism

by MUCKRAKER Twitter: @MuckrakerZim | 23 February 2018 | 92 Views

MDC-T violence simply barbaric, unacceptable

by Faith Zaba | 23 February 2018 | 59 Views

Mudzuri seeks legal opinion

by Staff reporter | 23 February 2018 | 169 Views

Chamisa digs in

by Staff reporter | 23 February 2018 | 153 Views

MDC-T succession battles more political than constitutional

by Staff reporter | 23 February 2018 | 71 Views

Mugabe says, 'Mnangagwa government is illegal'

by Staff reporter | 23 February 2018 | 517 Views

'Lacoste cabal' has captured MDC-T

by Staff reporter | 23 February 2018 | 130 Views

What ZRP had to say about yesterday's shooting and riots

by Staff reporter | 23 February 2018 | 116 Views

'How G40's power-grab plan collapsed'

by Staff reporter | 23 February 2018 | 126 Views

Looting at Tsvangirai's burial

by Staff reporter | 23 February 2018 | 140 Views