Tobacco farmers laud increased forex retention

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  • Farmers praise increase of forex retention cap
  • Negotiations ongoing to reach 70 percent

Harare – The Tobacco Farmers Union of Zimbabwe (ToFUZ) yesterday praised the Government for increasing the foreign currency retention cap from 50 percent to 60 percent ahead of the opening of the auction floors for the 2021 tobacco selling season.

While no date has been set for the selling of the golden leaf, floors are expected to be opened this month.

Under a controversial foreign currency retention scheme introduced by the Reserve Bank of Zimbabwe (RBZ) early last year, tobacco farmers surrendered 50 percent of their export earnings to the central bank.

This amount would then be liquidated in Zimbabwe dollars using the then fixed official exchange rate of US$1;Z$25.

This rate lagged well behind the parallel market, which kept increasing until the central bank introduced the foreign currency auction system in June 2020 partially calmed the markets.

Following losses from farmers emanating from this directive, tobacco farmers last month demanded a deal that creates value for their product.

The RBZ agreed to increase the foreign currency retention to 70 percent from the 50 percent cap last season.

Also among the measures introduced by the RBZ and the Agriculture ministry, there shall be no compulsory liquidation of forex retained.

Farmers are free to purchase and/or supplement their foreign exchange requirements from the auction system.

In a statement, ToFUZ pointed out that while they mooted for 70 percent foreign currency retention the 60 percent the authorities availed was not bad for the farmers.

“Though we would have wanted 70 percent forex retention for farmers, we applaud the RBZ and the Ministry of Agriculture for the policy review which is set to benefit farmers.”

Additionally, ToFUZ urged the authorities to initiate flexible input schemes for tobacco farmers not willing to join the contract system.

“The Government should also through the Reserve Bank of Zimbabwe (RBZ) unveil low-interest loans for tobacco farmers especially women and youths who are finding it difficult to fund their projects. This will certainly see an increase in tobacco production as farmers will increase hectare capacity.”

Tobacco is a strategic export crop in Zimbabwe which generates foreign currency earnings in excess of USD 900 million annually.

There were fears farmers would withhold their crop if they did not receive payments in US$ ahead of the tobacco-selling season set to start this month.

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