Country backtracks from converting export earnings to Euro, Rand

May 11, 2016 6:38 AM

The RBZ said its latest measures would "improve exporter viability and competitiveness while further enhancing the spread of liquidity generated from exports."

Wads of euro banknotes are stacked in a pile at the Money Service Austria company's headquarters in Vienna, Austria, March 3, 2016.

Zimbabwe's central bank on Tuesday said it would no longer convert half of all export earnings to Euros and Rand, backtracking from partial measures it introduced last week in a bid to ease an acute shortage of dollars.

Hyperinflation led the southern African nation to abandon its own currency in 2009 for others, including the U.S. dollar, British pound and Chinese yuan. But it has grappled with a shortage of notes since March.

The Reserve Bank of Zimbabwe (RBZ) last week set priorities for imports, imposed limits on cash withdrawals and said it would convert export earnings to euros and rand to ease demand for dollars in the economy.

But in a circular to banks and the public, the RBZ said it was reversing the measure but that 50 percent of export earnings in U.S. dollars should be transferred to it.

The money would be credited into accounts of banks held with the central bank on behalf of exporters, together with a 5 percent bonus for all export earnings.

Analysts say depressed commodity prices, rising imports, a lack of foreign investment and a strengthening U.S. dollar that makes Zimbabwean products less competitive are largely to blame for the cash shortages.