The Reserve Bank of Zimbabwe (RBZ) in its mid-term monetary policy said the country has seen a net foreign currency inflows of US$1,2 billion.
“The total foreign inflows of US$5,6 billion for the first six months of 2023 were against a total of foreign payments of US$4,4 billion, resulting in net foreign currency inflows of US$1,2 billion,” the RBZ said.
The development was attributed to the restrictive monetary policy which has kept unscrupulous activity under check in the period under review.
Banker Raymond Nyamuhwe said this further testifies to the soundness of the economy’s external and monetary fundamentals that are being pursued by the central bank.
“It is a testament to the tight monetary policy stance being driven by the central bank which is envisaged to sustain favourable exchange rate and inflation dynamics in the short to medium term,” he said.
According to statistics released by the bank, for the first half of 2023, authorised dealers processed foreign payments amounting to US$4,39 billion. This represented a 14,8 percent increase, from US$3,83 billion recorded for the same period in 2022.
Mr. Nyamuhwe added that, “The upward trajectory in foreign payments shows the increased capital absorptive capacity as the economy grows. We have seen machinery coming into the country, some for retooling and some for new companies.”
“The foreign payments were mainly towards capital and raw materials or intermediate goods, and this has gone a long way in enhancing industry capacity utilisation. Also, of significance are foreign payments for fuel that have continued to increase driven by domestic demand thereby offsetting the positive impact of the decline in global energy prices,” the RBZ said.
This has been driven by the efficiency of the central bank to distribute the available foreign currency among the users of the foreign currency.
“During the first seven months of 2023, the Bank allotted a total of US$382,93 million through the Retail Auction System, representing 69,45 percent of total bids submitted.
“Since inception of the Auction System in June 2020, a total of US$4,09 billion has been allotted, representing 85 percent of the total bids submitted,” the statement read.
On June 7, 2023, the central bank further liberalised the foreign exchange market and introduced the Wholesale Foreign Exchange Auction in a bid to strengthen the interbank foreign exchange market under the Willing-Buyer Willing-Seller (WBWS) arrangement.
Under this arrangement, the central bank auctions foreign exchange to authorised dealers at market-determined exchange rates for them to onward sell to their customers.
Since inception, the central bank has held 12 wholesale auctions, with banks submitting bids of around 32 percent of the amount on offer, largely due to the tight local currency liquidity conditions prevailing in the market.
“The Bank has allotted US$95,85 million under the Wholesale Foreign Exchange Auction, representing 91 percent of the total bids submitted. On average 12 bids were received per auction, with bids that were way below the market rates, not allotted as they presented arbitrage threats,” the RBZ said.
To complement the Wholesale Foreign Exchange Auction, banks have also been buying foreign currency from the market for trading on the Interbank Foreign Exchange Market.
“Cumulative purchases and sales on the Willing-buyer Willing-seller market in 2023 were US$112,57 million and US$107,19 million, respectively,” the bank said.
Analysts said if the central bank keeps their guard on the monetary front the country will see better prospects and a higher net foreign currency inflow.