Zimbabwe's central bank has been forced to make a U-turn on its plans to convert all US dollar foreign-exchange receipts from exports into rands and euros. It was an attempt to ease pressure on the high demand for scarce US dollars, which has caused a cash crisis. The about-turn by the governor of the Reserve Bank of Zimbabwe, John Mangudya, is a continuation of policy inconsistencies by President Robert Mugabe's administration. The government also recently climbed down on the 51% indigenisation law.The latest about-turn came on Tuesday, less than a week after Mangudya made a string of announcements to avert the cash crisis.Interventions included stringent withdrawal limits, an increased use of point-of-sale machines and the introduction in two months' time of bond notes which will be backed by a $200-million (R3-billion) loan from the African Export-Import Bank.story_article_left1Mangudya defended converting 50% of foreign earnings to 40% rand and 10% euro on the grounds that it was "a design to ensure that the demand for cash is spread among a wide range of currencies to mitigate against concentration risk".The plan said "authorised dealers" were advised that 50% of all new foreign-exchange receipts from the export of goods and services denominated in US dollars would be transferred to the central bank when the money came through.The remaining 50% would be credited to the exporter's foreign-currency account in US dollars."On receipt of the 50% export proceeds into its nostro account, the Reserve Bank shall immediately credit the same amount, plus the 5% export incentive/bonus in US dollar, into the authorised dealer's real-time gross settlement account for the exporter. Accordingly, the requirement for the apportionment of 50% of foreign-exchange receipts into 40% ZAR and 10% EUR has been removed with immediate effect," the bank said in a statement this week.Exporters receiving proceeds in other currencies would get 100% of their earnings credited to their corporate foreign-currency accounts immediately, plus the 5% bonus.The bank said it had removed the 10% nostro account threshold held by banks and had also removed a 15% cash-holding requirement announced in September 2014.The volatility of the rand and resistance from exporters who secure raw materials using US dollars were the key pressures that forced a rethink.story_article_right2Tobacco farmers had also rioted in Harare over the stringent cash withdrawals, pegged at $1000, forcing Mangudya to elevate their status to corporate clients which entitles them to daily limits of $10,000.Isheunesu Moyo, communications manager of the Tobacco Industry and Marketing Board, said tobacco sales had since returned to normal, after the removal of these restrictions."Tobacco farmers will also get a 5% incentive on sales," Moyo said.Zimbabwe's largest opposition party, the Movement for Democratic Change, led by Morgan Tsvangirai, is planning street demonstrations and to file a court challenge against the bond notes issued by the central bank."We discussed the issue of bond notes and resolved to go for street protests as well as follow the legal route to stop their introduction," said party spokesman Obert Gutu...