Dubai (New Ziana)-Government remains determined to tame black market foreign currency trading and will reinforce the weekly auction system to ensure currency and exchange rate stability, a senior government official has said.
The Reserve Bank of Zimbabwe introduced weekly forex auctions last year to improve access to foreign currency.
But, despite its earlier successes-which include price stability and pushing down black market rates, the auction system has been facing challenges chiefly the late disbursement of allocations.
This has prompted many businesses to turn to the black market for foreign currency which has the net effect of pushing up the parallel market exchange rate.
By August 30, the allocation backlog had soared to $175 million, but the central bank has made huge strides in clearing it and has guaranteed that going forward, all auction allotments would be paid within two weeks from the auction date.
Analysts expect black-market rates, which have been rising in recent weeks, to tumble once the backlog is cleared.
The Zimbabwe dollar is currently trading at Z$90 to the U.S. dollar on the official market while on the black market it goes for anything above Z$150.
In an interview on the sidelines of Expo2020-Dubai, Finance and Economic Development Permanent Secretary George Guvamatanga said;“I think we have come quite a very long way with our exchange rate management system, culminating in what we have now the auction system which is really an open market rate discovery system which is largely determined by a weekly auction. We actually believe that this is a very good methodology of price discovery and of exchange rate management.”
“We have actually seen productivity in Zimbabwe grow since the introduction of the auction system to a situation where the capacity in the manufacturing industry has grown to above 60 percent and we are also seeing quite a big range of our Zimbabwean products in our shops,” he told Zimbabwean media here at Expo20202-Dubai.
Guvamatanga said the fundamentals for currency and exchange rate stability were there but, deliberate behavioural actions by unscrupulous businesses and individuals were undermining this.
Last month, the RBZ barred several individuals from carrying out any mobile based financial transactions on allegations of partaking in illegal foreign currency trading.
“We are actually seeing one of the best fiscal management regimes in many years where we are actually living within our means without any need for us to resort to Reserve Bank funding or borrowing.
“On the external position, I think the latest numbers that were released show an increase of about 36 percent on our exports which is very strong growth which has resulted in our balance of trade being positive and the balance of that trade is reflected by the $1.7 billion currently sitting in FCA accounts,” he said.
“If you add the $1 billion that came from the IMF as Special Drawing Rights and the cash circulating in the country we easily have between $3.5 and $4 billion now circulating in the economy and that should actually be reflected in a much stronger exchange rate but we are very much aware of the other behavioural issues that have affected the stability of the exchange rate which we are addressing. But overall I think this is one of our strongest positions which we have had in many years.”
Guvamatanga was also upbeat about the country’s economic growth prospects, on the back of a good agricultural harvest and higher international commodity prices.
“We actually expect the economy to remain on a growth trajectory. We have projected a growth rate of 7.8 percent but the numbers that we are seeing coming through from the maize production, from good rain, wheat production, higher commodity prices, which are supporting mining, we actually have a much higher projection but for now, for prudence, we will stick to the 7.8 percent but we are confident that 7.8 percent is definitely achievable as a growth number for the economy in 2021.”
New Ziana