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The future of the Reserve Bank of Zimbabwe’s (RBZ) foreign currency auction system has been cast in doubt after it emerged that the bigger chunk of the foreign currency is coming from African Export-Import Bank loan.
African Export–Import Bank, also referred to as Afreximbank, is a pan-African multilateral trade finance institution created in 1993 under the auspices of the African Development Bank.
According to former Minister of Finance and current Vice president of MDC Alliance Tendai Biti, the auction system introduced by the central bank in June this year is an unrealistic hope that will crush land in the foreseeable future because of a variety of factors.
Chief among them is full dependency on Afreximbank loan.
In an interview with TechMag TV, Biti said the RBZ is currently rigging the system to achieve short lived politic results.
“The RBZ cannot continue pumping money which they borrowed illegal from the African Import and Export bank and it not sustainable to run a national program on debt. What is sustainable is that they should be a proper auction system where exporters go on the market and sell their currency with RBZ for it is the regulator but now the regulator is the player,” he said.
“ …,the auction system is just a myth for the auction has just created a parallel exchange rate of 1:100 and the official exchange rate remains stuck around 1:81 hence this dual currency regime -foreign currency and our local dollar has made these distortion in the economy,” he added.
The Reserve Bank of Zimbabwe (RBZ) introduced the new Foreign Exchange Auction System to determine the Zimbabwe dollar exchange rate with captains of industry and commerce cautiously optimistic that the platform will enhance transparency and efficient distribution of scarce forex.
However, Biti further added that grey imports are increasing which means that the volumes of foreign currency operating outside the auction are huge, creating a scenario of forex supply and demand mismatch.
Organisations like the Employers Confederation of Zimbabwe have warned that unless supply of foreign currency matches demand, it will be difficult to attain stability in the long term.
“Our view is that what is needed is for the country to generate more foreign currency through increased production and productivity, as well as exports. The supply of foreign currency at the very minimum needs to sustain demand from people intending to settle foreign obligations or to travel and consume foreign currency. We also need reserves of foreign currency of probably not less than six months cover in terms of the average monthly imports bill,” ECOZ said.
“Without supply meeting the demand any foreign exchange stability in an environment where there is not enough supply is not sustainable in the long term.”
However, the Ministry of Industry and Commerce’s recent report indicated that prices of most products, especially chickens, economy beef, bath soaps, eggs, flour, vegetables such as cabbages and tomatoes had stabilised.
Over the past weeks, the auction system has seen the local currency experiencing a positive gain against the USD.
The Zimbabwe dollar is currently trading at ZW$81,3458.
According to RBZ, the foreign currency come from offshore facilities arranged by the central bank, exporters among other other sources.
When an exporter has been paid for goods they sell abroad, they are required to sell their forex onto the official market within 30 days. The bank also anticipates that holders of free funds will also use the auction system to sell their forex on the market
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