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There was a marked increase in the number of participants on the foreign currency auction (FCA) system as applicants rose from about 500 at the beginning of 2021 to reach a peak of just over 2 000 by year-end to 2022.Speaking to TechnoMag, Reserve Bank Of Zimbabwe (RBZ) Governor Dr John Panonetsa Mangudya said the FCA will achieve a single exchange rate. “Our major thrust is on stability and to ensure there is convergence so that we can have a single exchange rate,” said Governor Mangudya adding “This will dampen exchange rate volatility.”
The auction system has provided essential liquidity to key productive sectors of the economy, leading to enhanced capacity utilisation and significant import substitution.
In 2021, US$1,97 billion was allotted, representing 97 percent of total bids submitted to the auction.
This amount represents around 30 percent of total foreign payments processed by banks in 2021, according to the Reserve Bank Governor Dr Mangudya. The share of allotments of the SMEs auction to total allotments grew from 8 percent in first quarter of 2021 to 19 percent in the fourth quarter of 2021.
”Most of the auction allotments went towards imports of raw materials, machinery and equipment as well as other consumables for industry, ” Dr Mangudya said.
The Zimbabwean dollar weakened against the US dollar on the last foreign currency auction on Tuesday.
The official exchange rate reached US$1: $138,19 up from $134,08 in the previous auction. On the black market, US$1 is trading at between $250 and $280.
Analysts have pointed lack of access of foreign currency, and delayed allocations to the value chains and speculative tendencies among retailers as major reasons why businesses were charging prices using black market rates.
“But while there might be some gaps, we encourage businesses not to participate on the parallel market to defend local currency and promote its usage and circulation,” Denford Mutashu, the president of Confederation Retailers of Zimbabwe confirmed to TechnoMag.
He said while clearance of the backlog was critical, there was need to create other paths of sourcing foreign currency to reduce traffic to the auction market, he said.
The foreign exchange auction system, which is now in its second year, continues playing a critical role in bringing transparency, inclusivity and stability in the trading of foreign currency in the economy. As at 31 December 2021, the central bank conducted 77 main and 71 SMEs auctions from its inception on 23 June 2020.
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