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Concerns over RBZ's reduction of forex retention for horticulture exporters
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The Horticultural Development Council (HDC) has expressed concerns about the Reserve Bank of Zimbabwe's (RBZ) recent decision to lower the foreign currency retention threshold for exporters from 75% to 70%. The policy change is seen as a major setback for Zimbabwe's horticulture sector, which heavily depends on foreign earnings to sustain operations, invest in growth, and remain competitive in global markets.
In a statement released by Linda Nielsen, CEO of the HDC, the council warned that the reduced forex retention would significantly affect exporters, who already operate within tight margins. Key inputs for horticultural production, including power, fuel, seed, fertilizers, packaging, and freight, are priced in US dollars. With less hard currency retained, exporters will face greater difficulty covering these essential costs, potentially leading to cash flow issues and less investment in the sector.
The horticultural sector's reliance on foreign currency for production and logistics means that the policy shift could have far-reaching consequences. Producers of export-oriented crops, like peas, which carry high production and logistics costs, may be forced to scale back operations. As a result, some farmers may pivot to growing alternative crops for the local market, which would reduce the sector's foreign currency inflows and economic contribution in the long term.
In response to the new policy, the HDC reiterated its earlier recommendation that local utility providers, including ZESA and local authorities, charge for services in Zimbabwean dollars (ZiG) rather than foreign currency. Currently, exporters face the challenge of paying for domestic services in foreign currency, despite retaining a smaller portion of forex. The HDC believes that switching to ZiG for local utility charges would help mitigate the pressure on exporters and support the wider move toward using the local currency.
Nielsen further called on policymakers to engage with the horticulture sector to find solutions that strike a balance between the need for foreign currency reserves and the long-term viability of the industry. A stable and predictable policy environment is essential to preserving Zimbabwe's standing as a key player in the regional and global horticulture markets.
The HDC's call for dialogue underscores the importance of ensuring that Zimbabwe's horticulture sector remains strong, competitive, and sustainable, despite the challenges posed by recent policy shifts.
In a statement released by Linda Nielsen, CEO of the HDC, the council warned that the reduced forex retention would significantly affect exporters, who already operate within tight margins. Key inputs for horticultural production, including power, fuel, seed, fertilizers, packaging, and freight, are priced in US dollars. With less hard currency retained, exporters will face greater difficulty covering these essential costs, potentially leading to cash flow issues and less investment in the sector.
The horticultural sector's reliance on foreign currency for production and logistics means that the policy shift could have far-reaching consequences. Producers of export-oriented crops, like peas, which carry high production and logistics costs, may be forced to scale back operations. As a result, some farmers may pivot to growing alternative crops for the local market, which would reduce the sector's foreign currency inflows and economic contribution in the long term.
In response to the new policy, the HDC reiterated its earlier recommendation that local utility providers, including ZESA and local authorities, charge for services in Zimbabwean dollars (ZiG) rather than foreign currency. Currently, exporters face the challenge of paying for domestic services in foreign currency, despite retaining a smaller portion of forex. The HDC believes that switching to ZiG for local utility charges would help mitigate the pressure on exporters and support the wider move toward using the local currency.
Nielsen further called on policymakers to engage with the horticulture sector to find solutions that strike a balance between the need for foreign currency reserves and the long-term viability of the industry. A stable and predictable policy environment is essential to preserving Zimbabwe's standing as a key player in the regional and global horticulture markets.
The HDC's call for dialogue underscores the importance of ensuring that Zimbabwe's horticulture sector remains strong, competitive, and sustainable, despite the challenges posed by recent policy shifts.
Source - byo24news
