In its mid term monetary policy statement going under the theme fostering price stability, the RBZ has revised export retentions ratios for exporters upwards. The move comes after what RBZ said was a positive impact of the auction system in price stability and the need to sustain the auction system.

“All export retention thresholds for all exporters will be at a standard level of 70% with immediate effect” reads the policy statement.

Before today’s revision only gold exports enjoyed the highest share of retention at 70% while the rest were at 50% or below. Gold export retentions were revised from 55% to 70% in May after sharp contractions were recorded in gold deliveries to Fidelity Printers, an agency which buys gold on behalf of the central bank.

However all other exports barely moves in retention terms, resulting in a worse off export receipts in the first half period of the year. A bone of contention across industry, has been the effects of a exchange rate disparity between the Interbank Market and the Parallel Market.

A highly suppressed interbank market grossly lagged the parallel market by wide margins. As at March the parallel market premium to the interbank was almost 100%. The portion of export receipts legislatively entitled for government purchase would be converted at the respective lower interbank rates relative to parallel market.

By implication a lower realized local currency converted amount would prejudice exporting companies given two key factors. Inflation was ravaging and galloping at hyperinflationary rate while local prices, charged in local currency were pegged against the parallel market exchange rate.

Exporters companies thus suffered the exchange loss arising from a forced conversion of their export receipts portion to the RBZ, whereas the local cost component would reflect higher parallel market rates.

To counter the impact of value loss, some export producers curtailed production levels with the hope that legislation would ultimately change in their favour. However, this would have the effect of weighing on working capital.

A listed miner, Rio Zim, which operates Rencho Mine among other gold mines, shut down its mines earlier in the first quarter of the current year citing liquidity challenges induced by RBZ’s mismanagement of foreign currency receipts.

Gold deliveries data to Fidelity shows that old deliveries fell by 50% which is 50% below the same the period last year. For the 6 months period to July, gold was down 22% on last year. Improvements in the interbank market and a narrowing gap between the parallel and the interbank rate, will likely help improve aggregate production in the economy. It is also expected to improve confidence in the government as fiscal and monetary authorities attempt to move towards market based economics