THE Parliamentary Portfolio Committee on Foreign Affairs, Industry and International Trade has described the stipulated 25% taken by government on foreign currency earnings as a “disincentive”
In a report tabled in parliament recently, the committee said the current exchange rate should be reviewed upwards to benefit exporters and that the time-frame for foreign currency usage should be revised.
The committee said the time-frame should be revised from the current 30 days to 45 or 60 days.
“While the foreign currency auction system introduced by the Reserve Bank has made forex easily available,” the committee said in its report, “it has been observed that the 25% at US$1: Z$824 acts as a disincentive to exporters as profit margins are almost eroded by this arrangement.”
The committee said an industrial and export strategy should be established through the introduction of export credit facilities and guarantees which should be closely monitored to avoid leakages into other markets other than in export production.
The committee said convergence of exchange rates should be managed according to terms of trade fundamentals with key trading regional markets.
It also recommended that government should put in place measures that would see the re-entrance of foreign investors who were continuing to leave the country in droves.
“Those foreign investors from friendly countries and technology (should) be mobilised for investment in existing and new capacity,” the committee said.
The export incentives that were introduced by the Reserve Bank have been criticised for not restoring profitability but only reducing the amount of losses that were being made by exporters.
Economic analysts said individuals were under the impression that exporters were making vast amounts of profits by virtue of their previous realisation on the parallel market yet in practice exporters were subjected to huge cost increases for a very long time.
They said there was need to boost the country’s image as an attractive investment destination for foreign investors who could come in as strategic partners.
“There should be a deliberate effort by the government to ensure adherence to transparency and accountability and should show a credible commitment to fight against corruption and enhancement opportunities for support regionally and internationally,” the committee said.
The committee, after consultations with key stakeholders, agreed to tackle, among other challenges, the interest and exchange rate distortions in the economy and persistent high government budget deficits.
It admitted that strained relations with some countries and the international donor and financial community were working against efforts to revive the struggling economy.