eBusiness Weekly
Nelson Gahadza
Industry says the Reserve Bank of Zimbabwe (RBZ) has so far maintained its promise to abide by its own rules to avail foreign currency to successful bidders within 14 days from the date of auction.
The central bank made the commitment in January this year after clearing the backlog of foreign exchange allotments largely on improved foreign currency inflows into the country.
Confederation of Zimbabwe Industries (CZI) president Kurai Matsheza told Business Weekly that the highest average weekly allotment from the auction this year has been US$18 million which is a sign of improved business activity.
“So far the RBZ has been fulfilling their promise, there has been no complaints from industry members,” he said.
According to RBZ Governor Dr John Mangudya the 14-day timeframe will go a long way in maintaining a stable foreign exchange rate and sustaining financial stability in the economy.
Due to low foreign currency inflows and reserves, the Central bank had struggled to supply adequate foreign currency which created a huge backlog which reached about US$300 million by August last year.
The auction was set up as a price discovery mechanism for the local currency as well as availing foreign currency to local companies needed for procurement of raw materials and retooling.
However, Matsheza said the current levels from the auction are still low compared to industry foreign currency requirements as at some point in time the highest allocation was for US$51 million.
“Therefore there are other factors that might be driving demand for foreign currency from the auction market such as increased availability of ZWL liquidity in the market.
“While the 200 percent tax had stopped liquidity in the market, anyone with ZWL is now going to extinguish the local currency at the auction market with the rate now at 150 percent,” he said.
At a time, the RBZ auction had foreign currency challenges, companies devised other alternatives such as the Willing Buyer Willing Seller (WBWS) option.
Matsheza however noted that there has not been significant activity on the WBWS market as there are more buyers than sellers of foreign currency.
“More so, companies are generating more foreign currency on their own as the economy is now more than 70 percent dollarized,” he said.
A recent Zimbabwe National Statistics Agency (Zimstat) indicated that approximately 76 percent of expenditure was now in US dollars, reaffirming the notion that a larger proportion of transactions in the country are now being done in forex.
According to Matsheza overall foreign currency issues for industry are still there, but better in other dimensions such as the semi dollarized economy.
According to the central bank, industry and critical imports such as fuel requires at least US$100 million per month.
RBZ recently indicated that US$51,79 million was allotted to 263 beneficiaries under the main foreign exchange auction during the month of January 2023 and the sum of US$5,88 million was allotted to 386 beneficiaries under the SMEs foreign exchange auction during the same month.
