RBZ foreign exchange auction injects US$32 million

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By Alois Vinga

THE Reserve Bank of Zimbabwe (RBZ) foreign exchange auction this week allocated US$32,04 million to support key productive sectors amid market expectations that measures announced recently will go a long way to arrest parallel market volatility.

A trading update released at the close of business Tuesday shows that on the Main Auction a total 389 bids were received with a value of US$28,3 million.

Raw materials needs were allotted US$12,4 million, machinery and equipment US$6,5 million, consumables US$2,3 million, services US$2 million, retail and distribution US$2,6 million, pharmaceuticals and chemicals US$1,2 million to give a total of US$28,3 million.

On the Small to Medium Enterprises auction a total US$3,7 million was allotted with raw materials needs receiving US$999 034, machinery and equipment US$1,3 million, consumables US$464 584, services US$390 693, retail and distribution US$315 999.

The grand total allotted towards the two platforms reached US$32, 043, 311.

The exchange rate depreciated by 0,9% from the US$1:148,87    recorded last week to the current rate of US$1: $150,21 reached this week.

On the parallel market, exchange rates have almost doubled with dealers paying $250 per every US$1 while selling every US$1 for up to $300.

However, market watchers are optimistic that the measures recently enacted by the central bank which saw the increase of interest rates for up to 80% coupled with the accelerated excess liquid mop up will go a long way to cut back Zimdollar supplies to the parallel market and reduce exchange rate deterioration.

Commenting on the weekly allotments, economist Persistence Gwanyanya said the results will soon be reflecting the willing seller willing buyer arrangement approved by the central bank which will also go further to rein in the disparity between the two exchange rates.

“You will also note that for the last few weeks allotments have been hovering around US$32 million contrary to the initially set targets of US$40 million. This has been prompted by the fact that the government is no longer supporting the auction system due to its current US$ salary commitments,” he said.

Gwanyanya said the central bank is simply allotting what it has in its coffers and expressed hope that going forward, the willing seller, willing buyer initiative will unlock more foreign currency to the auction and unlock revenue streams.

“These measures, coupled with the target to clear the backlogs on the Main Auction before the end of April will strengthen the auction system,” he added.