Former MDC Parliamentarian and Veteran Economist Eddie Cross, says it is critical for the Reserve Bank of Zimbabwe(RBZ) to hike the proportion of forex exporters must sell at the ruling rate to cover forex gap on the auction.
Cross once the late MDC Icon Morgan Tsvangiray’s top economic advisor until recently was part of the RBZ monetary policy committee.Reserve Bank of Zimbabwe (RBZ) is now able to adequately meet the demand for foreign currency at its weekly auction after it hiked from 30 to 40 percent the amount exporters must liquidate at the ruling exchange.
Before the central bank increased the surrender threshold, the auction struggled to fully meet the requirements of importers, which often fell short of demand by between 10 and 15 percent.
However, exporting firms complain that the new earnings surrender threshold is too high and claim when combined with other tax like or related costs, has become an unsustainable tax.
Mr Cross said he has always been in support of the initiative to increase the liquidation proportion, which he said has enabled the central bank to meet demand for forex from the local market.
“It was essential to increase the threshold in order to meet demand for forex and it is working. We are getting adequate forex and we are able to meet demand from the local market,” he said.
Even Chairperson of the Confederation of Zimbabwe Industries’ (CZI) trade committee, Mr Henry Nemaire, said reverting to the previous lower surrender threshold would boost manufactured exports.
The Reserve Bank introduced the weekly foreign currency auction in June last year, initially for large corporates and later on another platform for small to medium enterprises (SMEs). The platform has enabled the bank to allot nearly US$700 million to about 800 different entities that required hard currency for key imports that include raw materials, machinery and equipment.
Prior to introduction of the auction system, Zimbabwe saw constant exchange rate volatility, resulting in ever changing price shifts and runaway inflation, which peaked at 837 percent last year.