Over 1 500 benefit from RBZ forex auction
A TOTAL of 1 506 beneficiaries, inclusive of 1 154 Small and Medium Scale Enterprises benefited from the Reserve Bank of Zimbabwe’s foreign currency auction system for the month of August.
The Government through the Reserve Bank introduced the auctions in June 2020 as part of measures to stabilise the exchange rates and improve businesses’ access to forex.
This means Zimbabwe has from that period saved millions of US dollars through increased domestic production, helping to preserve and grow local employment instead of exporting jobs by buying from other countries.
In a statement RBZ governor, Dr John Mangudya on Thursday revealed that there were 352 beneficiaries of US$74,8 million allotted in the main forex auction in the month of August.
“In line with the Bank’s commitment to regularly keep the public informed of developments in the foreign exchange market, the Bank hereby publishes a list of the 352 beneficiaries of US$74 818 220 allotted under the Main Foreign Exchange Auction during the month of August 2022.
“A list of the 1 154 beneficiaries of US$15 996 378 allotted under the SMEs Foreign
Exchange Auction during the month of August 2022; and a schedule showing the total foreign exchange payments for the period January 2022 to August 2022, by source, amounting to US$5 306 865 010,” said Dr Mangudya.
He revealed that of the US$5,3 billion payments made from January to August, US$4,2 billion went towards foreign currency accounts, US$925 million to foreign exchange auction allotments and the interbank market got
US$113 million.
“The bulk of the auction allotments during the month of August 2022
(71 percent) was for payment for raw materials
(US$42 118 094) and machinery and equipment
(US$22 343 924), with the remaining 29 percent of the total allotments going towards payment for services
(US$9 345 489), consumables
(US$7 913 708), retail and distribution (US$5 050 610), pharmaceuticals and chemicals
(US$2 557
581), packaging
(US$1
459 452) and fuel, electricity and gas
(US$25 740), as shown in the tables below.
Total cumulative foreign exchange auction allotments since inception of the Foreign Exchange Auction System stand at US$3 521 882 028,” said Dr Mangudya.
Meanwhile, the auction system has injected US$13,6 million into companies in the week which ends on Tuesday, as the Zimbabwean dollar marginally depreciated in the interbank rate moving to ZW$613,37 against the US dollar. The previous week, the Zimbabwean dollar was trading at ZW$604,26. The auction’s injection represents a decrease from the US$15,63 million disbursed last week.
According to the weekly update, a total of US$11,56 million was allotted on the main auction, while the other US$ $2,09 million was channelled to the SME auction. The system has been credited with the reduction of the country’s inflation from a high of 837 percent in July 2020 was introduced to cushion businesses against foreign currency shortages as well as stabilise the local currency.
As part of the measures to mop up excess liquidity in the market and curtail the rampant inflation, the Central Bank recently introduced the Mosi oa Tunya gold coins as an avenue of storing value. The coins since their inception have been widely credited with helping narrowing the gap between the auction rate and the parallel rate halting the decline in the parallel market rate for the local currency.
The Minister of Finance and Economic Development, Professor Mthuli Ncube recently revealed that the gold coins are proving to be popular as ZWL8 billion worth has been sold since the gold coin’s inception.
Commenting on the performance of the auction system, economist, Mr Stevenson Dlamini said despite initially starting off slow the system would further improve efficiency and narrow the parallel market exchange rate premium.
“I believe the purpose of the Auction system, beyond allocating scarce foreign currency at economic rates, is to act as a price discovery mechanism for the RTGS.
Its performance has been characterised by delays in honouring the allotments but however, of late it had gained marginal efficiency as we see the RTGS vs USD premium on exchange rates narrowing.
“This was to a great extent also a consequence of stringent monetary stunts by RBZ which has been closely managing Money Supply growth.
“As Government moves to be more thorough in monitoring the use of funds allocated on the Auction System, the system may further improve efficiency and narrow the parallel market exchange rate premium,” said Mr Dlamini.