Forex retention to stay, says RBZ

THE Reserve Bank of Zimbabwe (RBZ) says the prevailing foreign currency retention levels on gold export proceeds will remain in place to support the interbank market established to improve foreign currency availability in the economy. Of late, players in the mining industry have been advocating for a review of the retention levels upwards to cover production costs.

Speaking at the small-scale miners conference organised by the Zimbabwe Miners' Federation during Mine Entra in Bulawayo last week, RBZ deputy director, Mrs Getrude Machingura, who stood in for Central Bank Governor Dr John Mangudya, said the foreign currency retention scheme was necessitated by the need to secure critical imports.

"It's not every sector in the economy that produces foreign exchange. We only get this foreign exchange as we export so the retention thresholds at 55 percent to the producers and 45 percent to the Reserve Bank shall continue to apply," she said.

Mrs Machingura said of the 45 percent foreign currency retention to the Reserve Bank, 50 percent of the proceeds were being sold on the interbank foreign exchange market so that it can be used for other non-exporting sectors of the economy.  

"For instance, Zesa imports need this foreign currency so we need to surrender something. It's not peculiar to our country to have exporters surrendering a portion of their export earnings because we all have to work together for the good of our country," she said.

Mrs Machingura said the Central Bank was aware of the concerns that small-scale miners and the mining industry at large have. Against this background, the monetary authority would continue to engage the miners regarding the retention levels, emphasising that production was key to sustaining economic growth and development.

"Naturally retention levels may fall away if the inflows of forex improve but when that will be is only the heaven knows. But we envisage moving to vision 2030 together as one."

On recent fiscal policy measures announced by the monetary authorities, Mrs Machingura said Government has taken a multi-pronged approach to currency reforms for the economy to transition to normalcy by moving away from challenges that were associated with the multicurrency regime.

"So, it was like a three-phased approach. The first one was to separate FCAs from the RTGS accounts in October 2018, which set the tone for the currency reforms.  

"Secondly, there was the liberalisation of the exchange rate following the establishment of the interbank foreign exchange market in February, then the third part, there was the removal of the multicurrency system and the re-introduction of local currency on the 24th of June through S.I. 142 of 2019," she said.

S.I. 142 of 2019 among others entails the re-introduction of the Zimbabwe dollar represented by the RTGS$ and that the Zimbabwe dollar will be the sole currency to be used for legal tender purposes in Zimbabwe.

Government took the route upon realising that the market was choosing to price most goods and services in US dollars when the majority of citizens were earning the local unit.

The use of multiple currencies since 2009 also denied Zimbabwe control of its monetary policy and left the economy at the mercy of US dollar pricing, which brought inflation.