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Zimbabwe central bank governor Dr John Mangudya has admitted prejudicing the country’s exporters by exchanging their US dollar earnings at parity with the local bond note, when rates on the parallel market were at a 400% premium.
Since the southern African country introduced its local surrogacy currency, the bond note, in 2016, it had pegged it at a ratio of 1:1 with the US dollar, but this did not last for long, as foreign currency shortages on the formal market resulted in parallel market rates spiraling to unsustainable levels.
However, the Reserve Bank of Zimbabwe (RBZ) insisted on pegging the local bond note at par with the US dollar, prejudicing exporters who had to surrender part of their export earnings to the central bank.
But following Wednesday’s presentation of the 2019 Monetary Policy Statement, the central bank has now admitted prejudicing foreign currency earners.
"I want to say I am guilty as charged for collecting exporters' money at a fixed exchange rate of 1:1 when prices had risen by three or four times," admitted Mangudya at post Monetary Policy Statement breakfast meeting held on Friday.
He said with effect from Monday next week Zimbabwe, would abide by an official exchange rate and market forces, through banks would determine the exchange rate.
The rate will open at 1:2.50, as per agreement with foreign currency dealers in the banks, said Mangudya.
To stabilise the market, Mangudya said the RBZ would arrange foreign lines of credit, since demand would be greater than the supply of foreign currency.
"We need to cloud seed the market with foreign currency," he said.
Before the new foreign currency management measures, gold miners were surrendering 70% of their export earnings and tobacco farmers 80%, while manufacturers and tourism were keeping 100% of their earnings.
Platinum and chrome miners were surrendering 80% of their export earnings "to ensure effective administration of foreign exchange".
In exchange for the foreign currency, the central bank would pay the exporter using Real Time Gross Settlement, crediting the exporter’s account with local currency at parity.
This caused distortions on the market, with some exporters, such as listed gold miner RioZim, threatening to shut down operations if the foreign currency disparities were not addressed.
