Drop 75/25 export surrender – National Competitive Commission tells RBZ
Miners have been given a glimpse of hope as the government-owned National Competitive Commission (NCC) has urged the government to abolish the export surrender requirement and implement policies that support exporters, who continue to suffer from exchange losses.
By Ryan Chigoche
This recommendation was revealed in the NCC’s latest report, which analyzed the Reserve Bank of Zimbabwe (RBZ) Mid-Term Monetary Policy, released last month.
Last year, the central bank allowed exporters, including miners, to retain 75% of their export earnings in foreign currency, up from a previous cap of 60%. However, this still falls short of miners’ demands to retain 80% of their export earnings in foreign currency.
Since then, miners, who desperately require foreign currency, have been pushing for a higher retention rate to meet operational needs.
Currently, Zimbabwe is experiencing exchange rate misalignment, with the official interbank rate of 1 USD: 13.87 ZWG used to liquidate 25% of export earnings, compared to the average parallel market rate of 1 USD: 23 ZWG, resulting in a premium of over 50% as of September 5, 2024.
This disparity has negatively impacted exporters, as they are unable to recover the liquidated foreign currency at the rate at which they are forced to convert a portion of their proceeds to the RBZ.
In its report, the NCC called on the government to abolish the export surrender requirement and instead incentivize exporters to generate the much-needed foreign currency.
“The Commission recommends that the export surrender value should be a temporary measure. A truly reflective exchange rate will unlock free funds from the private sector. The Government should focus its efforts on export promotion through incentives to increase foreign currency inflows and eliminate the surrender value to improve export competitiveness. A more flexible exchange rate enhances the competitiveness of exports and makes imports more expensive, potentially improving the trade balance,” the NCC said.
According to the RBZ MPS review, 50% of the export surrender value is being supplied to the formal market to improve foreign currency supplies. However, this continues to constrain the supply of foreign currency in the formal market, negatively impacting the country’s competitiveness, the NCC noted.
The country’s foreign currency-starved economy requires all exporters to convert part of their export earnings into local currency at an official exchange rate significantly higher than the widely used black market exchange rate, leading to losses for businesses.
The widening gap in the exchange rate is being driven by informal market activities. The NCC also noted that the government is doing very little to control these informal sector activities.