Govt turns on printing press
As pressure mounts to finance exporters relinquishment portion
LIVINGSTONE MARUFU
Government is facing mounting pressure to turn on the printing press in order to provide funds for exporters to surrender a portion of their proceeds, multiple analysts and the captains of industry have warned.
All exporters must now give up 25% of their export revenue to the Treasury and keep 75% of their foreign exchange earnings.
They claimed that since the funds are not part of the budget, there will be more pressure on the government to provide the 25% of export earnings that go toward paying exporters in local currency.
Jimmy Psillos, head of economic affairs for the Confederation of Zimbabwe Industries (CZI), stated that the desire to compensate exporters was the reason behind the expansion of the broad money supply.
“The central bank is creating excess liquidity to pay the exporters through the surrender requirement arrangement and that has created a vicious cycle of the exchange rate. They (RBZ) have created additional Zimbabwe dollars in the market to settle local currency requirements for exporters and this pushes up the exchange rate. It even gets worse when the local currency exchange rate goes up, the central bank has to create more money to cover the obligations. That is why we have been chasing our tails for a very long time,” he said.
Although the Treasury has assumed the burden, Psillos said the main issue is that this money was not budgeted for and will now need to be created.
Christopher Mugaga, the CEO of the Zimbabwe National Chamber of Commerce (ZNCC), told Business Times that the export retention threshold is an official declaration by the government that the Zimbabwe dollar is going nowhere but is causing inflation through money creation.
“The printing of the excess money in the market to cater for the 25% surrender requirement shows that there is a huge problem in economic policy making as the economy is operating at optimal level. There is no reason to print money but to use the available Zimbabwean dollars in the economy,” Mugaga said.
According to the central bank, the overall effect of this action is to increase the foreign exchange resources available to the government and the bank to meet their foreign exchange needs for funding the forex auction system and paying off their national and international debts.
