Mangudya unveils export-focused MPS
RESERVE Bank of Zimbabwe (RBZ) governor John Mangudya yesterday made a passionate plea for a boost in production in an export-focused mid-term monetary policy statement that unveiled measures to increase the country’s footprint in foreign markets.
He said the RBZ was keen to improve liquidity, whose shortage has ruined businesses and rocked the frail economy, “within the national economy through the promotion of exports by putting in place targeted export support measures”.
The measures included an export finance scheme under which the central bank would, through normal banking channels, establish a window to provide affordable pre and post-shipment export financing.
He also unveiled a facility to promote targeted horticultural exports to diversify the export base as well as mobilisation of development financial resources to finance capital projects necessary to enhance production within the country.
He said the generation of foreign exchange resources in Zimbabwe was currently dependent on receipts from tobacco sales and therefore the liquidity position in the country greatly mirrored the performance of the tobacco season, with foreign exchange inflows declining significantly during the tobacco off-season period and vice versa.
The vulnerability of the country’s liquidity conditions to tobacco inflows therefore made it important for Zimbabwe to explore ways of export diversification or widening the range of critical products that the country exports.
“In this regard, the country would need to take advantage of the normalisation of relations with the European Union to expand horticultural and other exports in which the country has competitive and comparative advantages.
“Given that there is a ready market for flowers, fruits and vegetables, the Reserve Bank shall be working closely with the Agricultural Marketing Authority, the Horticulture Promotion Council and banks to put in place a facility for the deliberate promotion of targeted horticulture exports,” said Mangudya.
He said enhancing mineral exports would also help to diversify the export base. As a result, Cabinet had approved the lifting of a ban on the export of chrome ore, environmentally friendly river bed mining or river drenching.
“To this end, expeditious exportation of these minerals will go a long way to bring into the economy the much-needed liquidity as the tobacco season comes to an end,” said Mangudya.
He abolished the requirement for exporters to seek prior exchange control approval on non-sales exports.
This includes exports of machinery for repair and return, samples, goods for replacement, and wrongly supplied goods.
Authorised dealers can now approve these exports without prior exchange control approvals.
Mangudya called on the synchronisation and harmonisation of export authorisation, saying there was “great need to synchronise and streamline the issuance of export permits by various regulatory authorities in order to reduce export barriers”.
“Whilst some export permits are necessary for phytosanitary (relating to the health of plants, especially with respect to the requirement of international trade) and other special considerations like food security, some export permits would need to be scrapped as they have outlived their usefulness in a liberalised foreign exchange environment. Export permits increase the cost of doing business and can be a hive of corruption,” said Mangudya.
Mangudya said Zimbabwe was now only able to increase its liquidity through exports, Diaspora remittances, foreign investments and external lines of credit because of the hard currency regime adopted after the country ditched its own currency to escape a hyperinflationary crisis.
“These sources of foreign exchange remain key, directly impacting on the expansion of the country’s deposit base, and the availability of loanable funds to productive sectors. They are therefore the liquidity life lines of national economy, which need to be jealously guarded against and to be seriously promoted for sustainable economic recovery,” he said.
He said since adoption of multiple currencies in 2009, export earnings accounted for over 61 percent of the country’s liquidity, followed by Diaspora and international remittances (27 percent), external loans and foreign direct investment at 13 percent.
“In view of the integral role played by export earnings in the generation of foreign exchange resources or liquidity, there is great need to put in place deliberate measures to promote production across the whole spectrum of the economy. This is critical to generate the much-needed export earnings to improve liquidity conditions whilst simultaneously substituting or displacing imports. In this regard, export facilitation and promotion remains critical,” said Mangudya.
The RBZ governor said various arms of government should effectively implement approved policy measures to stimulate production which he said was a bedrock and prerequisite to enhancing liquidity, exports, fiscal space, employment, debt sustainability, and reduction of poverty.
He said the solution to the economic challenges besetting the country lay “in competitively enhancing production and productivity across the whole spectrum of the economy”.
“We need to competitively and sustainably grow the economy by a minimum of five percent per annum. This is the philosophy behind the Africa Rising Narrative.
“We need to do more to increase production and productivity which is achievable by ‘walking the talk’ through implementing the government approved production-friendly package of policies that include further opening up the economy for investment and tourism consistent with the current liberalised national economy; setting up of joint ventures, implementation of the special economic zones; open tourism policy; removal of obstacles that inhibit production and exports; targeted productive lending; reduction in the cost of doing business and/or improving the ease of doing business; and the promotion of Diaspora investments.”