Mixed feelings over RBZ forex retention reduction

THE move by the Reserve Bank of Zimbabwe (RBZ) to reduce foreign currency retention for exporters has drawn mixed reactions from stakeholders including businesses and economists.

In his recent 2025 Monetary Policy Statement (MPS), RBZ Governor Dr John Mushayavanhu reduced the foreign currency retention level for exporters from 75 percent to 70 percent, with immediate effect, which implies that the effective surrender portion of export proceeds has been increased from 25 percent to 30 percent.

Reserve Bank of Zimbabwe Governor Dr John Mushayavanhu

Dr Mushayavanhu said the review is consistent with the increased use of ZWG in the economy citing that the additional five percent will ensure that exporters mobilise sufficient ZWG to meet local currency obligations and other expenses, including tax payments, going forward.

“In order to guarantee continued stability in the interbank foreign exchange market through augmenting the supply of foreign currency, as well as building the critical foreign currency reserves needed to anchor the ZWG, the foreign currency retention level for exporters has been reduced from 75 percent to 70 percent, with immediate effect,” he said.

In an interview economist Dr Prosper Chitambara said this is a double-edged sword for businesses in the sense that businesses would prefer to retain as much foreign currency in their accounts as possible. “In fact some have called this indirect tax on businesses but on the other hand the retained foreign currency will help to bolster the foreign currency position or the reserves, which is critical, I think, in terms of ensuring the sustainability and stability of the ZWG,” said Dr Chitambara.

He said while there has been improvement in foreign currency reserves, there is still more to do.

“If we can at least have three months of import cover, that would go a long way in terms of boosting confidence and ensuring the stability and sustainability in the ZWG but it is also probably a signal that at some point authorities are looking at de-dollarisation. So, I think that is also a step in the direction of eventual de-dollarisation,” said Dr Chitambara.

Economist and university lecturer, Mr Stevenson Dlamini, said the move is aimed at improving foreign currency reserves.
In addition, he noted that this should be complemented by the USD-denominated Investment Fund, which is meant to incentivise exporters to save five percent of their retention.

“However, the success of this policy will depend on how the market perceives it. If perceived as punitive, as witnessed by the concerns from the horticulture industry, this might dampen export growth,” he said.

Mr Dlamini further highlighted that if well implemented and backed by an efficient foreign exchange availability for exporters, then it will lead to positive economic growth and build-up of foreign currency reserves in the medium term.

Tanganda Tea Company Limited, in its trading for the first quarter ended 31 December 2024, said the move will further affect the viability of exporters.

TANGANDA Tea Company Limited

The horticulture sector recently raised concern amidst foreign retention reduction citing that the reduction will have less hard currency to meet critical expenses that operate within tight cost margins with most inputs such as power, fuel, seed, fertilisers, and packaging denominated in US dollars.

Prior to the RBZ announcement, exporters had been advocating for 100 percent retention, stating that high export surrender requirements made it difficult to access foreign currency for critical expenditure and financing operations.-chronicle