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Oliver Kazunga, Senior Business Reporter
THE Reserve Bank of Zimbabwe (RBZ) says a foreign currency auction trading system will begin next week Tuesday to replace the fixed US$1:ZW$25 exchange rate.
In a public notice today, the Apex bank said approved importers would be bidding every Tuesday through their banks for the foreign currency earned by exporters or through offshore facilities arranged by the monetary authority.
It is believed that the system would bring transparency and efficiency in the trading of foreign currency.
While the official exchange rate has remained at US$1:ZWL$25, the parallel market rate has been relentlessly drifting, rising as high as 1:70, creating financial distortions in the economy.
“Further to the bank’s press statement of 8 June 2020 by which the Monetary Policy Committee advised that a formal market-based from exchange trading system will be put in place, the bank wishes to advise the public that the Foreign Exchange Auction Trading System will be operational with effect from 23 June 2020,” it said.
RBZ said the foreign exchange will come from three sources namely, the offshore facilities, which the monetary authority would arrange; retained export earnings liquidated at the new prevailing market rate when exporters do not spend or sell these retained funds at the end of 30 days; and the foreign currency sold by exporters and holders of free funds through the banking system at the prevailing market rate.
The Apex Bank stated that the weekly auction will set the official ruling market exchange rate for the next seven days, and the rate being the weighted average of the prices paid for the allotted currency at the end of each auction.
Under the foreign currency auction system, RBZ said bidders were required to submit one bid per auction, and if more than one bid is submitted all their bids would be rejected.
The bids to be submitted through authorised dealers, defined as banks are expected to come from individuals, firms and public enterprises.
“The auction will only accept bids for a minimum amount of US$50,000 and a maximum amount of US$500 000 from each bidder per auction.
“The bidding platform shall be the Reuters Foreign Currency Auction System, which shall be linked to the Computerised Export Payments Exchange Control System (CEPECS) and Computerised Exchange Control Batch Application System (CECBAS),” said RBZ.
It said allotments for winning bidders will be based on the import priority list.
Successful bidders will buy the currency at the rate they bid, starting from the highest bidder and working down until all currency on offer is allotted.
“Successful bids will be allotted in full, but if funds are not enough then there will be pro-rata allotments.”
Banking institutions are expected to serve all importers and users of foreign currency at the ruling rate between auctions and the crawling exchange rate will only be used for Government and debt service.
Among other requirements, bids have to include the name of the bidder, bank, type of transaction and sector category, the amount in US dollars being sought, the rate being offered, the Zimbabwe dollar equivalent, a declaration of any foreign currency account balance and also highlighting that the money being sought is for imports.
@okazunga
Online Reporter