The Reserve Bank of Zimbabwe announced on August 21 that it had set the threshold for foreign currency retention at 70% for all exporters. The bank has said that the decision comes into effect immediately. The announcement is a part of the broader measures that have been drawn up to promote productivity in the country and sustain the system of foreign currency auction. The retention threshold for the exporters was set at various levels previously and was dependent on the degree of lobbying from the different sectors.
In early 2020, miners were allowed to keep up to 70% of their hard cash. It increased from 55%, and the farmers were allowed to retain only 50%. The rest was cleared off at the ruling exchange rate. Dr. John Mangudya, the Governor of Central Bank, has clarified that the period of liquidation of the unutilized balances of foreign currency has shot up to 60 days from 30. The extension of the liquidation period will help the exporters to manage their cashflows better.
The foreign currency auction system was introduced in June. It has received rave reviews for bringing about stability in the country’s economy through facilitating hard currency to the productive sectors at an affordable rate. Earlier, the primary source of foreign currency for the companies was the parallel market, but it came at a high price.
To sustain the auction system, the central bank has decided that 20% of the foreign currency receipts of the providers of goods and services will get liquidated when deposited in the domestic foreign currency accounts. However, the existing balances in the domestic foreign currency accounts will never get affected by the implementation of this policy. The central bank has confirmed that the foreign currency account balances have grown to USD 405 million from USD 352 million in January. The swelling of the foreign currency balance is excellent news as these are sure signs of the growing confidence in the economy.