GOVERNMENT would review lending rates and foreign currency retention threshold on exports or domestic foreign currency accounts (FCA) in the first quarter of 2023 during which a further liberalisation of the exchange market will be done to enhance the efficiency of the auction system.
Industry and commerce executives have continuously been lobbying for the widening of the export retention threshold citing the need for local industry capitalisation and value preservation.
The forex retention threshold varies according to sectors with the mining sector, for instance, retaining 70 percent of their proceeds and liquidate 30 percent in local currency.
Financial economists have also advised the monetary authority to liberalise the foreign exchange market in the long run to achieve sustainable exchange rate stability and eradicate distortionate parallel market forces.
In a statement yesterday, Reserve Bank of Zimbabwe (RBZ) Governor, Dr John Mangudya, said the proposed review of forex retention and exchange rate liberalisation were part of the resolutions made during the Monetary Policy Committee meeting last Friday.
He said the meeting, which discussed macro-economic and financial developments and their implications on monetary policy, also expressed satisfaction with the positive impact of the recent policy measures on economic stability and noted the need to sustain the gains realised so far.
Dr Mangudya said the committee was pleased with the improved business confidence owing to the prevailing stability in the economy.
“Against that background, the committee unanimously agreed to stay the course of a tight monetary policy until the first quarter of next year and resolved as follows: to maintain the bank policy rate and medium-term lending rate at current levels of 200 percent and 100 percent, respectively, and to review the interest rates in the first quarter of 2023 as dictated by inflation developments,” he said.
“To further liberalise the foreign exchange market in the first quarter of 2023 and to enhance efficiency in the operation of the foreign exchange auction system and the willing-buyer willing-seller foreign exchange mechanism.
“To review the foreign currency retention thresholds on exports and domestic FCAs during the first quarter of 2023 in line with improved efficiency of the foreign exchange trading systems in order to sustain the current growth trajectory in foreign currency receipts.”
The Governor said the committee noted the progressive decline in monthly inflation, from a peak of 30.7 percent in June 2022 to 1.8 percent in November 2022, which has seen annual inflation falling from 285 percent in August 2022 to 255 percent in November 2022.
He commended the continued close coordination of fiscal and monetary policies in stabilising the economy saying this was a necessary precondition for sustaining the current disinflationary process and a bedrock for sustainable growth of the economy.
“The committee expects that the economy will grow by four percent in 2023 and that inflation will remain stable at below three percent per month throughout the year,” he said.
Meanwhile, the Apex Bank has pledged to continue supporting the productive sectors of the economy through the Medium-Term Lending Facility, which Dr Mangudya said will be increased in 2023 from the current limit of ZW$10 billion to ZW$20 billion.
Under this framework, he said micro, small and medium enterprises, individuals and the productive sectors of the economy can borrow at interest rates applicable from time to time. – Chronicle
