Thread by @shingaiRndoro

Why foreign currency has to be produced in large quantities:
⏩To buy modern technology.
⏩To repair, maintain& refurbish both industrial & public utility equipment.
⏩For foreign investors to get their dividends.
⏩To finance private & public sector foreign debts.

Foreign currency is produced by exporters, foreign tourists & diasporan remittances.

Exporters can be from agricultural, mining & manufacturing sectors.

When foreign currency is earned, its deposited into local banks who in turn transfer the currency to the central bank.

All that forex transferred to the central bank constitutes the country’s foreign currency reserves.

For a country to be involved in international trade, it needs to build on its forex reserves.

It also means trading partners have confidence for the country.

Without enough foreign currency produced in an economy, it means obligations for investments, transactions & international debt won’t be fulfilled.

Who wants to do business or open lines of credit with those from a country that defaults on such obligations?

This is basic economics that shld inform public policy & advocacy by trade associations like @czionline @ZNCCNational @cifozim, etc.

Public policy shld be friendly to specific business sectors & the market in general.

Politicians&bureaucrats can be literate but anti-market.

“Countries use FX reserves 2 keep a fixed rate value, maintain competitively priced exports, remain liquid in case of crisis, & provide confidence for investors. They also need reserves 2 pay external debts, &afford capital 2 fund sectors of the economy.” thebalance.com/foreign-exchan…

A gvt should treat exporters as the economic cash cow.

The exporters should:
⏩have control over 100% of their export earnings,
⏩bank export earnings locally,
⏩receive fiscal incentives to export more, &
⏩get FX preference for the input imports of their export business.

The current policy was there before 1980 & therefore 2 me its statist&commandist.

Policy proposals:
⏩1. 100% export earnings retention,
⏩2. 90% acquittal of export earnings,
⏩3. local banking of all export earnings,
⏩4. exporters given priority to buy FX for inputs.

Such public policies address the supply side of an economy & a little concern for redistributionist politicians&bureaucrats who derive power thru endless controls even to the detriment of a thriving pvt sector.

The pvt sector is the cash cow 🐄 & employer in an economy.

When a country has a thriving economy, the Gvt will earn more revenue from tax & it can afford to spend more on infrastructure, improved public services & robust social services.

@ZimTreasury @GGuvamatanga @MthuliNcube @Min_of_IC are the foot soldiers & plumbers of the economy.

When the Gvt has solid revenues thru taxes from a vibrant private sector, it can afford to pay its employees decently & for infrastructure, public services, social services & procurement & international trade obligations.

This is economics for national interest!