RESERVE Bank of Zimbabwe chief John Mangudya was this week taken to task over the introduction of bond notes as an export incentive measure backed by a US$200 million facility from Afrexim Bank at a breakfast meeting held in the capital.
By Fidelity Mhlanga
Economists called for a 3% import tax across the board as an incentive for exporters.
This comes after Mangudya announced last week the central bank had established a US$200 million foreign exchange and export incentive facility to cushion the high demand for the US dollar and to provide an incentive of 5% on all foreign exchange receipts through bond notes.
The announcement bond notes would be introduced in two months’ time sparked panic monetary authorities were contemplating sneaking the infamous Zimbabwean dollar through the back door.
Strategic Research Analysis senior advisor Ashok Chakravarti on Wednesday said introducing a 3-5% import tax across the board would be a better way to stimulate exports in the country.
“We should put a 3% import tax across the board on all imports. Many other countries have done that and this will help. It is going to reduce imports and will give incentives to exports. I think the bond notes are unnecessary. We need to put a 3-5% import levy,” Chakravarti said at a breakfast meeting held by the Zimbabwe National Chamber of Commerce.
However, Mangudya said the issue of raising the import tax would push commodity prices high as well as impact on some exporters importing raw materials.
“We have done some sensitivity analysis to look at what is good for this economy. This country is not ready for the import tax because we are not getting enough from the current tax heads. There are containers of goods that are coming in the country without paying duty,” Mangudya said.
“Bond coins were for solving the change problems, bond notes are an export incentive. It’s called a token of appreciation. We can’t put the money in US dollar in the economy because it will vanish.”
To address the liquidity crisis, Chakravarti said government must avoid over expenditure and plug cash leakages.
He also queried why government was floating treasury bills of about US$2 billion in a small economy like Zimbabwe, where deposits were sitting at US$5 billion.
Mangudya said the usage of the US dollar coming from export earnings currently at US$3,6 billion, against other currencies has been growing in the country since 2009.
According to Mangudya, the use of the US dollar in 2009 was 49% before surging to 50%, 60%, 70%, 95% in 2013, 2014, 2015, 2016 respectively.
He said in the 90s exports were hovering around US$1,7 billion against the current US$3,6 billion, adding that the utilisation of the money had ballooned through excessive imports that are draining liquidity from the economy.
Mangudya said he was mulling an incentive for money transfer agencies to boost the channeling of money in to the country.
He took a swipe at some retailers who stash cash at their homes depriving banks of deposits, a situation currently aggravating the cash shortages in the country.
One exporter, Lovemore Mukono, said he feared monetary authorities would print up to a billion of bond notes, more than the US$200 million facility and cause chaos similar to that of 2008 era.
“The team which has been advising you is the same team which destroyed the economy in 2008. Who is going to supervise that when we are asleep at home more money won’t be printed,” Mukono asked.