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Economists got it all wrong on last year’s blend rate

I WOULD like to know where economists Eric Bloch and Anthony Hawkins get their figures.

Hawkins is quoted in the Financial Gazette of March 4 as saying expor

ters are now given “an effective blend rate of $3 233 compared to $3 662 last November when the parallel market rate was $6 500” and “that exporters are 12% worse off than they were last year”.

Bloch in his regular column (Independent, March 5) states that exporters received an “exchange rate late last year of about US$1: $4 800” and now “are suddenly faced with a blend rate of about US$1: $3 200”.

Whilst these commentators are more or less correct with today’s rate of about US$1:$3 200, they are both incorrect in their calculations on the blend rate at the end of last year. They have both omitted to factor in the offshore finance effect and the fact that companies in Export Processing Zones received the full parallel rate.

Up until the end of last year, exporters were allowed to borrow offshore to pay for imports. Export proceeds used to repay offshore loans were not subjected to the $824 RBZ “essential goods” subsidy.

Most companies that I know of used all their export proceeds in this manner as they not only imported materials for manufacturing goods for export but also imported materials to manufacture goods for the local market.

This means that a company that used all its export proceeds for imports received a blend rate equal to the parallel rate as none of the export proceeds were taken by the Reserve Bank at US$1:$824.

So the blend rate for most exporters was the parallel rate or somewhere near the parallel rate depending on how much forex was borrowed offshore.

Last year companies in Export Processing Zones were not targeted for the US$1:$824 subsidy and were allowed to keep all their export proceeds. So their blend rate was also the parallel rate.

Exporters are around 50% worse off now than they were last year, not 12% as Hawkins has stated!

Has RBZ governor Gideon Gono also calculated incorrectly?

Stephen Cocco,


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