Chronicle Editor
Oliver Kazunga, Senior Business Reporter
THE introduction of the foreign currency auction system has created a platform for businesses to settle their legacy debts while ensuring continued supply of critical raw materials, an industry expert has said.
Due to depressed capacity utilisation in the local manufacturing sector value chain, some companies were procuring raw materials from foreign markets as far as Asia and Europe, among others.
Towards the end of June this year, the Reserve Bank of Zimbabwe (RBZ) introduced the weekly foreign currency auction replacing the fixed exchange rate.
Since its introduction, the auction system has brought some stability in the financial services sector.
Speaking during a ZBCtv programme called “Market Update”, Zimbabwe National Chamber of Commerce (ZNCC) past president Mr Davison Norupiri said: “This foreign currency auction system has actually tamed the black market; we used to have our exchange rate going up daily and at times twice or three times a day.
“It has now stabilised as a result of the forex auction system. We have also seen prices of goods coming down because before the introduction of the auction system, formal businesses were pricing their goods using the black market rate.”
Mr Norupiri said the quoting of prices using the parallel market rates was causing a lot of challenges as far as pricing is concerned.
“We now have a stable situation both on pricing and exchange rate.
“The introduction of this foreign currency auction system has also helped very much on corporates especially those that are formal businesses which are now able to pay their legacy debts and also pay for new supplies from their foreign suppliers,” said Mr Norupiri.
He said owing to the weekly forex auction, the formal sector has now been oiled regarding their operations.
“So, corporates have started functioning and are now working very well because they were relying very much on black market, which was also not good as far as competitiveness is concerned,” he said.
The Bankers Association of Zimbabwe (BAZ) has welcomed the forex auction saying the initiative has stabilised the exchange rate and has also brought transparency and efficiency in the trading of forex. — @okazunga
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