admin
Golden Sibanda
The Reserve Bank of Zimbabwe (RBZ)’s inaugural foreign currency auction system – post dollarization – got off to a flying start yesterday with US$10,43 million worth of applications being allotted across sectors from bids valued at US$11,4 million.
With effect from yesterday, the RBZ replaced the interbank market with weekly foreign exchange auctions to be used to determine the official Zimbabwe dollar exchange rate, which had been put on a temporary fixed rate since late March this year.
The RBZ’s statement yesterday evening, showed that the Zimbabwe dollar exchange rate slightly more than doubled from $25 to US$1 to $57 to US$1, being an average weighted rate that effectively becomes ruling rate.
The average weighted rate was calculated from highest bid rate of $100 and the lowest bid price of $25 while the largest amount was allotted towards raw material procurement US$2,88 million, followed by machinery and equipment US$2,4 million, food and beverages US$1,398 million, services US$1,308 million and consumables US$1,208 million.
According to the central bank, portfolio investments were given US$436 400 while fuel, electricity and gas received US$263 147,46 chemicals US$257 015, livestock US$53,636 and medicals US$50 000.
Efforts to get an official comment from the RBZ were unsuccessful yesterday but a member of the bank’s monetary policy committee who attended the inaugural auction, said there were several applications from buyers and most of them were settled.
“I was there all morning, all I can say is that the process was transparent, I saw all the applications, including those that were rejected and I felt that all rejections were justified.
“Importantly, 100 percent of the successful applications for forex were funded. We had 17 banks putting in applications for forex and had several pages of applications but every application from every individual company was settled and the average rate came in at $57 to the US dollar,” the source said.
Business leaders said this week that if conducted properly without interference from authorities, the foreign exchange system, introduced and abandoned after little success in 2004, would enhance efficient and transparent distribution of forex.
The country started experiencing crippling shortage of foreign currency needed for key imports a short while after fixing the exchange for price stability following outbreak of the Covid-19 pandemic while holders of forex started withholding their money arguing the fixed rate had become sub-economic.
Zimbabwe has a huge demand for forex needed for imports, which exerts unbearable pressure on the exchange rate and inflation, due to its seriously constrained productive capacity.
Analysts believe that if the new system works as expected, it would help build market confidence, improve access to foreign currency and help stabilise the exchange rate, while speculative activity on the black market could subside significantly.
Zimbabwe has experienced exchange rate volatility and runaway inflation since abandoning the US dollar dominated multicurrency regime in February 2009 and reintroducing local currency, which was then floated on the interbank market.
The auctions would be conducted on Tuesdays to buy and sell the foreign currency retained by exporters, which must either be used or sold within 30 days at the discretion of the exporter or be subject to compulsory sale after 30 days.
RBZ governor Dr John Mangudya, said last week the auction system will operate on the Reuters Forex Trading platform, a real-time electronic foreign exchange trading system.
Under the new foreign currency auction system, bids will be submitted to, allotted and evaluated by RBZ with the offers for foreign currency while bids from buyers are submitted in the morning every Tuesday.
Confederation of Zimbabwe Industries (CZI) vice president Joseph Gunda, said this week industry was highly expectant that the auction system would bring about transparency and efficiency in the trading of foreign currency, ensure market-led price discovery and improve availability.
According to the Reserve Bank, the auction will only accept bids of a minimum of US$50 000 and a maximum of US$500 000 with individuals and firms required to make a single bid per week through an authorised dealer.
However, the ruling exchange rate established during the weekly auction will be the rate for smaller sales and purchases of foreign currency during the week before the next auction.
Online Reporter