SENIOR STAFF WRITER
RESERVE Bank of Zimbabwe (RBZ) governor John Mangudya says the retention schemes for gold producers, tobacco farmers and other exporters will remain at 40 percent US dollars and 60 percent local currency.
Speaking during the Monetary Policy Statement (MPS) webinar hosted by the Daily News yesterday, Mangudya said the retention policy remains unchanged to buttress the current price stability.
This comes as the Zimbabwe economy has been experiencing relative calm since last year when authorities introduced a raft of measures that include a foreign currency auction system, a cap on daily mobile money transactions and banning the dual-listing of counters on the stock exchange.
“As the tobacco marketing season approaches, it is important to note that the US$ retention will not change. It is essentially the same across the board; even for gold,” Mangudya said.
He said the MPS statement comes as tobacco representative bodies were pushing for a significant review of the retention policy.
Tobacco Farmers Union of Zimbabwe (TFUZ) president Believe Tevera had approached the Tobacco Industry and Marketing Board (TIMB) lobbying for its members to get 70 percent in foreign currency and 30 percent in Zimbabwe dollars.
Mangudya said the retention policy remains important for the sustenance of the foreign currency auction system.
“The foreign currency auction system has assisted in the discovery of an appropriate and stable market-based exchange rate for the country.
“Whilst more still needs to be done in this area, the evident stability of the exchange rate, following the introduction of the foreign exchange auction system on 23 June 2020, has minimised distortions in pricing by curtailing speculative pricing and parallel market exchange rate indexation of prices by businesses,” he added.
As a result of the auction system, RBZ says the parallel exchange rate premium has reduced to a tolerable band of up to 20 percent, consistent with experiences in other countries.
In addition, the establishment of an appropriate market-based exchange rate system has assisted in dampening pressures on inflation.
The Zimbabwe dollar is trading at about $83 to the US$.
According to the RBZ, US$795 million has been allotted as at February 9 this year since the introduction of the foreign exchange auction system.
A significant proportion of the total amount allotted has been earmarked for strategic sectors for imports of essential goods, especially raw materials, equipment, pharmaceuticals, chemicals, fuel and electricity.