Captains of industry and economists say the Government has turned on the printing press in order to provide funds for exporters to surrender a portion of their proceeds, thereby contributing to the precipitous fall in the value of the Zimbabwe dollar against other currencies.
All exporters are required to surrender 25% of their export revenue to the Treasury and keep 75% of their foreign exchange earnings.
Jimmy Psillos, head of economic affairs for the Confederation of Zimbabwe Industries (CZI), was quoted by Business Times as saying the Reserve Bank of Zimbabwe is creating excess liquidity to pay the exporters. He said:
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.
Zimbabwe National Chamber of Commerce (ZNCC) CEO Christopher Mugaga told Business Times that the export retention threshold is an official declaration by the government that the Zimbabwe dollar is going nowhere. Said Mugaga:
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 an optimal level.
There is no reason to print money but to use the available Zimbabwean dollars in the economy.
According to the RBZ, the overall effect of the 25% surrender requirement is to increase the foreign exchange resources available to the government and the bank.
This will enable the central bank to fund the forex auction system and pay off national and international debts.
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