RBZ brings back floating exchange rate

Tawanda Musarurwa

The Reserve Bank of Zimbabwe (RBZ) says foreign currency trading on the interbank market will again take place on an auction basis.

This will end a pegged rate of 25 to the United States dollar, which was introduced at the end of March following the onset of the Covid-19 pandemic.

The re-introduced auction system will be with effect from the 23rd of this month.

Said RBZ governor Dr John Mangudya in a statement today:

“The Foreign Exchange Auction Trading System will be operational with effect from 23 June 2020.

“The adoption of a Foreign Currency Auction System is expected to bring transparency and efficiency in the trading of foreign currency in the economy,” he said.

Key features of the proposed foreign currency auction system include: bidders will submit their bids as individuals, firms and public

enterprises through their Authorised Dealers (banks); bidders will only submit one bid per auction. In cases where the bidder submits two or more bids, all the bids shall be rejected; allotment of foreign currency to winning bids will be based on the

Import Priority List, and the auction will only accept bids for a minimum amount of US$50,000 and a maximum of US$500,000 from each bidder per auction.

The central bank also said 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 (CEBAS).

The interbank foreign currency exchange market was introduced last February as part of measures that saw the re-introduction of the Zimbabwe dollar.