Zimbabwe reverses controversial plan to convert export receipts

The Reserve Bank of Zimbabwe (RBZ), or the central bank, has scrapped a controversial plan to convert corporate export receipts denominated in the U.S. dollar into the South African rand and the euro barely a week after announcing the measure to counter a liquidity challenge facing the country's financial system.

RBZ Governor John Mangudya on May 4 announced a cocktail of measures to address the cash shortages, including plans to introduce bond notes, limiting withdrawals and conversion of 40 percent of all export receipts into rand and 10 percent into euro.

Zimbabwe introduced a multi-currency regime in 2009 after abandoning its hyperinflation ravaged currency. There are nine currencies in the multi-currency basket including the rand and the euro but the U.S. dollar is the dominant currency.

The central bank did not give reasons for the policy u-turn but concerns had been raised in some quarters that the foreign exchange directive would discourage exports as the rand was fairing very lowly against the U.S. dollar.

Authorized dealers are advised to transfer half of all new foreign exchange receipts from the export of goods and services denominated in the U.S. dollar to the central bank. The central bank shall immediately credit the same amount plus the 5 percent export bonus into the dealer's RTGS (real-time gross settlement systems) account for the exporter.

The central bank said exporters receiving proceeds in other currencies will get 100 percent of their earnings credited to their corporate accounts immediately, plus the 5 percent export incentive in bond notes.

The RBZ also announced the removal of a 15 percent cash holding requirement for commercial banks.

Since earlier this year, Zimbabwe has been grappling with a cash crisis that authorities blame on low export earnings and externalization. Endit